I guess this does sound a little scary for the government to be developing, but isn't it also an ultimate form of a blog? Add some tools to highlight the interesting bits of my life, and this would essentially be a photo album with attached map and audio. They are even talking about adding haptic sensors to record tactile sensations. Obviously, the expense of something like this points it in the direction of monitoring select individuals, rather than everyone on the planet.
The Information Processing Technology Office (IPTO) of the Defense Advanced Research Projects Agency (DARPA) is soliciting proposals to develop an ontology-based (sub)system that captures, stores, and makes accessible the flow of one person's experience in and interactions with the world in order to support a broad spectrum of associates/assistants and other system capabilities. The objective of this "LifeLog" concept is to be able to trace the "threads" of an individual's life in terms of events, states, and relationships.