It doesn't really work with Flash LSOs (which Google itself uses for tracking, along with classic cookies). Basically, all Chrome can do is advise Flash that it's in "incognito mode" and the Flash plugin actually has to act upon that. Of course, the Chrome people call this "fixed":
http://code.google.com/p/chromium/issues/detail?id=158
The simple solution is to disable Flash, but that assumes that the site(s) Vinny submits to don't turn out to need Flash to actually function. That's increasingly true these days. <sigh>
Unfortunately, there's other emerging frameworks that exist beyond the browser instance -- Microsoft Silverlight, Google Gears (part and parcel of Chrome), etc. Most people think of "plugins" as plugging some bit of functionality _into_ your browser. But, it can be the case that you're plugging your browser _into_ some other piece of crap that doesn't give a crap about your privacy.
From a long-term perspective, nothing will get solved soon. Standards like HTML5 are supposed to reduce the need for third-party plugins like Flash. But, those standard also involve caching "state" on the client in ways that Flash and traditional web cookies only wish they could.
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