They do not like it, but the paranoia that has built up about using an automated tool to check rankings is a bit ridiculous.
Think of it as being the same as a posted speed limit. No one actually drives the speed limit, but most people stick close to the posted speed. You don't run much risk of getting a ticket if you are doing 40 in a 35. However, if you are doing 75 in a 35, your risk of getting in trouble rises dramatically.
Google isn't seeking out and penalizing the guy going 40.
If you're still uneasy about upsetting Google by using ranking software on their site, just use the software to check rankings on other Google-powered sites such as iWon or AOL... the results are nearly identical and you won't risk having your IP recorded by Google.
Is there a difference between using ranking software and doing it the old fashioned way - typing it by hand? I do lots of ranking checks by hand on Google, especially around update time obviously. I also compare the search terms people use to visit my site to where I rank in the listings (its always informative to see how far up/down you are for particular keywords people use to visit the site). Is this good? Bad? Harmless?