And thats why you don't overlook app permissions.
As far as trusting the 3rd party developers, larger ones (like CM/etc.) Have a large enough community to cross-check whats actually going on. The beauty of open source software.
Also, you could always roll your own from the source. I mean, that is sort of the point of the AOSP.
honestly though, people overlook them all the time
For example:
Angry Birds - 50 million + downloadsPermissions:
Modify/delete SD card content
Read phone state and identity
Full Internet Access
Coarse (network based) location
Words With Friends - 10 million + downloadsSame as above, but instead of Coarse Location, this one has access to read all your contact data instead
And that's just for a couple, retardedly popular, free games. You want real scary potential, go look at GO SMS Pro. I use it for my text messaging program, and all those permissions do have valid functions within the program....but my God, it's scary to think the things they could do with what they have access to