From tor.eff.org:

Tor is a toolset for a wide range of organizations and people that want to improve their safety and security on the Internet. Using Tor can help you anonymize web browsing and publishing, instant messaging, IRC, SSH, and other applications that use the TCP protocol. Tor also provides a platform on which software developers can build new applications with built-in anonymity, safety, and privacy features.

and the official word on the seizures:

Last week, a few Tor exit nodes were seized by the German police in a massive sting against child pornography. From our friends on the ground in Germany, we hear that dozens and dozens of other computers unrelated to Tor may have been seized too.
...
This is not a "crackdown on Tor", as has been widely reported. This seems to be part of a wide sweep on computers associated by IP address with a large child porn bust. There does not seem to be any specific targeting of Tor — Tor is used by journalists, human rights activists, dissident bloggers, and a vast array of blameless users.

From theregister.co.uk:

Prosecutors in Germany have seized 10 servers which hosted the anonymising service TOR.

The action has raised fears of a wider clampdown against the service, which provides a way for people to browse the internet anonymously. The seized machines are assumed to be TOR exit nodes.

But according to at least one blogger, the police seized the machines as part of a child porn investigation.

For a worst case scenario

For the original mailing list thread on the seizures

For an overview of what TOR means to a user who relies on the service

For an update on the current situation

For two more cogent analyses of the issue (read these once your read the preceeding links):
blog.wired.com post
www.boingboing.net post

I use TOR myself when online at various locations, anywhere with an unencrypted access point (read linuxcaffe), or with a WEP encrypted AP, or even with WPA using a weak passphrase (I check). TOR is an invaluable, free, and cooperative service to which I will now make a point of contributing my available bandwidth so as to ensure that it gains in use from the situation in Germany.

The typical line that you've got nothing to fear if you have nothing to hide is simply irrelevant to anyone who may have occasion to trot it out in the context of the current situation.

My $0.02.