I started with Desktop Search. I find I use this as much to run programs as to search for files. My Start menu has grown so big that it's a lot faster and easier to type a few letters into the search box. I don't use much of the Desktop other than the search feature. The "sidebar" and "gadgets" are nifty but I find them more distracting than useful.
Next I switched my primary email to Gmail. I've talked about that previously. I'm still pretty happy with it. I like having my email available wherever I am. I use the POP access to backup my email to a copy of Thunderbird on my desktop. My wife recently got fed up with spam on her email account and I set her up with Gmail, forwarding her old email to it so she didn't have to change addresses.
I use Picasa for organizing, viewing, and tweaking photos. I have other more "powerful" tools, but I find I use Picasa a lot of the time. It makes posting a picture to my blog quick and easy.
With more of my tools in the browser, Google Browser Sync is a very handy Firefox extension. It keeps my bookmarks, passwords, and cookies in sync between all the machines I use.
Wow, until I started writing this entry, I didn't realize just how many Google tools I was using!
I am using a few Yahoo tools as well - del.icio.us for my bookmark collection and I've played a bit with Flickr for photos.
Someday, I'd like to move to Linux and/or Mac as my primary desktop (instead of Windows) so I like using web tools that are available (almost) anywhere there's a browser. (I did have some trouble using Gmail from some older machines when travelling. I learnt to ask for a Windows XP machine at internet cafes.) It's too bad that some of the Google tools are Windows only, but they are porting some stuff to Linux, like Picassa and Earth.