Tor hides your location from destination servers, but it does not encrypt <i>all</i> your communication. The last relay of a Tor circuit, called the <i>exit node</i>, establishes the actual connection to the destination server. This last step can be unencrypted, for example, if you connect to a website using HTTP instead of HTTPS.
Observe your traffic. That is why <i>Tor Browser</i>andTails include tools to encrypt the connection between the exit node and the destination server, whenever possible.
The Tor network has more than 6 000 relays. Organizations running Tor relays include universities like the MIT, activist groups like Riseup, nonprofits like Derechos Digitales, Internet hosting companies like Private Internet Access, and so on. The huge diversity of people and organizations running Tor relays makes it more secure and more sustainable.
End-to-end correlation attacks have been studied in research papers, but we don't know of any actual use to deanonymize Tor users. For an example, see <a href="https://www.freehaven.net/anonbib/cache/murdoch-pet2007.pdf">Murdoch and Zieliński: Sampled Traffic Analysis by Internet-Exchange-Level Adversaries</a>.
