Most apps will ask for the moon, knowing the only choice you have is to install or not install. I switched from Pandora to Stitcher when Pandora started requiring access to my contact list and calendar - a music player doesn't need access to that information to play music. If you contact Pandora, they will tell you they need that access to create events (e.g. concerts) or share songs with your friends. Sure, fine, whatever.
The problem is, even if you trust the application to not abuse your data, you have no recourse if you don't.
This is why so many people have requested Google give users the ability to choose what permissions an app is given. So the app can still ask for the moon, but you as the user can decide if you want to give the application that level of permissions or not. e.g. install Pandora, but tell it no you can't access my contact database or calendar.
Naturally, Google does not want to do this, because they are afraid of people blocking internet access for some apps, e.g. Angry Birds, and suddenly the ads are blocked - upsets the application developer, who then stops using Android. However, that's a specious argument since there is obviously a way to satisfy most users while still allowing ads to be displayed to satisfy most application developers and advertisers.
If you, like me, feel Google should listen to its users and give the user the power to choose what sorts of access applications have to your data, spread the word about this issue. Note comment #44 where a Google employee specifically states this is the most requested feature, and that they are not going to fix it.
Issue 3778 - android - Feature request: Application permissions should be individually grantable by the user - Android - An Open Handset Alliance Project - Google Project Hosting