The setgid bit on a directory (in the group-execute portion represented as an s or S) forces all files to be created in the directory with the group of the parent directory rather then the user's primary group. This is the BSD file creation semantics rather than SYSV.
By default Debian uses a umask of 755. It is a long and well known Linux tradition to create home directories world readable as it encourages a sharing environment. Users can always change the permissions on their home directory or any subdirectory they want to keep private.