WebDAV is a protocol that essentially allows read
and write access to web-based (HTTP) resources. Typically, WebDAV is used to interact with a web server or a service like .Mac on the Internet.
However, Mac OS X has an industrial-strength, built-in web server that has full WebDAV support. I don't mean Mac OS X Server (although that also has Apache, among other things). I mean the client version of Mac OS X running on everybody's home computer.
The web server and WebDAV support is off by default on the client version of Mac OS X, but presumably OmniFocus would make it easy to enable the WebDAV service and allow you to wirelessly sync your data with your local machine, without going through .Mac, MobileMe, or any other third-party server.
Of course, the advantage of syncing through a remote server, instead of just keeping it all local, is that you can sync from anywhere that you have an Internet connection. And your iPhone can send and retrieve data over a cell network when you're on the road.
But you're right about privacy risks with data stored on a remote machine. Anything on .Mac or MobileMe can potentially be seen by an unscrupulous Apple employee or contractor. Syncing only to your local Mac over its built-in web server largely protects you from that - unless a bad guy has physical access to your local machine or your network. And even if the bad guy has access to your network, risks could be largely mitigated by transferring data over HTTPS (encrypted connection), but I don't know if OmniFocus will support that (and it may very well be overkill).
-Dennis