Strictly speaking, it's an improvement over the current situation where you are tracked across the web to come up with a profile of your interests which is then used to deliver targeted advertising. The interest-based advertising is the end goal, it's where Google makes its money. Google doesn't necessarily need your data or to track you across the web to do that. I think people are unhappy that it doesn't go far enough and just want either no targeted advertising or no advertising at all. Removing the ability to target ads would result in more ads being needed to make up for lower quality placements, which I believe would lead to increased ad blocker usage and an advertising death spiral. News sites are already almost practically unusable on mobile without blocking ads for example. Having no advertising means getting revenue another way such as paywalls and subscriptions.

With the Topics API, your browser will keep track of your history and provide sites with a limited number of topics (1 per week). Instead of being an opaque system on an ad provider's server, you can examine and modify the topics being used in your browser or even look at the source code of the feature in the browser itself. With the Protected Audience API, the ad bidding process can occur in the browser as well instead of on a remote server. These features can be turned off.

There is definitely some concern that they're screwing over third-party advertisers which is why their pages come with stuff like:

subject to addressing any remaining competition concerns of the UK's Competition and Markets Authority (CMA)

Regardless, Chrome ditching third-party cookies means that websites can no longer rely on them and must adapt their sites to function without them. This will mean that Firefox's Total Cookie Protection should work better and they can remove third-party cookies in the future instead of having to create workarounds.