I just took a 2-week vacation in Bavaria, and indeed, the rampant smoking was shocking to me as an American. However, I did not see it inside, only outside. It was especially annoying when I wanted to look at a restaurant's menu outside and some idiot with a cigarette was standing in the doorway; I just went by and found another restaurant when that happened. I saw tons of people (usually male) smoking outside right next to doorways, in entranceways, on the sidewalks, etc., many times in the rain and cold. The level of cigarette smoking, plus the poor city air quality due to all the diesel cars, really made me question if I could stand living in Germany any time in the next 20 years (probably about as long as it'll take to become more like America now).
However, I did not once see anyone smoking indoors, and it seemed to be illegal in public places from what I could tell. Are things different in Berlin?