The latest version of the Google Toolbar for IE (Google Toolbar 5) adds two new patterns: email addresses and URLs. If you click on AutoLink, Google Toolbar will transform into links all the email addresses and the web addresses from a page. You can click on the button again to highlight the content that has been detected, but a better idea is to see all the results in a drop-down.
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According to the privacy policy, "AutoLink works by sending Google page text (such as addresses or ISBN numbers) for which AutoLink information is available." I noticed that Google Toolbar sends the address of the page to Google's servers, probably for detecting physical addresses, since everything else can be performed locally.
In 2005, when AutoLink became a part of Google Toolbar 3, many people complained that Google changes the content of web pages, but they ignored that users need to click on a button to add the links. It's also worthwhile to mention that you can change the services that are linked using this feature and that Google doesn't make money from referrals.
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