For the stated example of an adulterous husband on a business trip, you're right. The odds are low of Mrs. James finding it. But since pictures are grouped by physical location instead of residing in some stranger's flickr account, people are very likely to see people they know in cases when long-distance travel is not involved.

Is this a privacy issue? Strictly speaking, I don't think it is any less legal than flickr (but IANAL). But it definitely pushes the boundaries when it comes to thinking about your own personal privacy.