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Stevie

At least in Germany Google Analytics is illegal as well. But it is illegal because of another point: Google Analytics saves the IP address of your visitors without asking them for permission. But before you are allowed to save a IP address you have to get an implicit permission of its owner. It is not enough, when you just put a disclaimer on your website.
Google is even allowed to give this IP address to third parties if you accept its Terms of Service. So I recommend you to read them.
There is an open source alternative open source tool which does not save any IP addresses (but as well cookies!): http://www.phpmyvisites.us
On my blog there is a more detailed article about Google Analytics.

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