It just goes to show you what is possible -- this bug just lets everyone be the NSA for a change
Think about it: Your phone has a microphone, a video camera (usually front AND rear), device storage, and wifi/3G Internet connectivity to do the transmitting.
We have to TRUST that the software (both applications as well as operating system) is doing everything it can to protect our privacy. But is it 100%?
Trust me, as a programmer I know it's very possible for various people to end up with your conversations, and/or video taken by your front/rear cameras. Imagine if your phone were in the bathroom with you! Or if private conversations (etc!) between you and your spouse were recorded.