In most cases employers apply employee monitoring to ensure information security and local network accountability. Though employees sometimes say that bosses are carrying it too far, in most cases they aren't doing it out of pure malice. Company owners are protecting themselves from losses due to reputation-damaging scandals, costly workplace harassment lawsuits and data leakage.
Even installation of the powerful spy tool that is able to record all keystrokes typed can be justified if the employees are dealing with trade secrets or some other highly valuable (in a direct sense of this word) information. It doesn't necessarily imply distrust - some companies just won't survive if some confidential information is lost.
If the employer doesn't allow staff to surf a bit during lunch breaks, it doesn't at all mean the boss is a petty tyrant or just greedy. There is another reason for these restrictions.
Unrestricted Web surfing from workplace computers leads to corporate PCs swarming with malicious software. In fact, lots of these computers already are choke full of various unwanted programs, some of them extremely dangerous.
Now consider the fact that no single anti-virus or anti-spyware product protects against all the crap that might land in workplace computers. You are lucky if it's just irritating adware. But in case of programs capable of stealing information, like keyloggers or keylogging-containing Trojans, a single "overlooked" program may mean lost valuable data.
Of course, employee monitoring software should be installed by authorized people only, i.e. people who have the right to do this. When applying tools for PC monitoring, it should noted that usage of monitoring software could be illegal if such a product is installed on a PC that belongs to other person.