I really haven't had much time to learn on bitcoins, so sorry my dumb question.. but when people are buying illegal drugs by using bitcoins, are they really "Announcing it to everyone else?". I believe, maybe in theory, that there's a clear trace of the transactions, but it gets way more easier to hide both side, no? For instance, we know that XYZ shared 1k$ with ABC.. good luck finding to find out who's that XYZ.
Yes, that's exactly it. The shared, public, distributed block chain records every transaction that has ever taken place [1], so everyone knows and agrees on the amounts that are associated with each address. As long as nobody knows what addresses you use, it's anonymous with respect to a real-world identity.
By the way, I'd love to learn more and start using bitcoins.. transferring money with paypal or by, shrug writing paper cheques, feels so much deprecated. As an anecdote.. I'm using two different banks (One for work, one personal) but I can't share money between both accounts! Even if they both have online accounts.. I need to write the transaction on papers and go to the local bank to trade it. Thankfully I practically never do it.. or if I do it it's because it's big enough amounts that I'm happy to do it, but still..
