Unlimited backup storage for low-quality, highly-compressed photos. If you want to store photos the way they were shot, you'll quickly run out of space and will have to pay up.
(That's what made me pay Google directly for the first time; extra storage for backing up photos.)
Google's phones (ie: Pixels and their XL variants) get full size photo and video backups included. Even if you don't have a Google phone, the free-of-charge backup only compresses photos over 16MP which is still pretty adequate for most people taking snapshots on their cell phones.
For the hobbyist or pro photographer backing up their full frame RAWs, sure, you want a more professional (read: paid) backup solution but that doesn't seem unfair to me. For the 95% of users who want to free up space taken up by vacation snaps and selfies, compressing photos over 16MP is often acceptable when it doesn't cost extra.
The photos are neither low-quality nor highly-compressed. I personally can't tell much of a difference 95% of the time and I'm a technical person. Here´s a comparison and a closeup, left image is the original, right one compressed with the Unlimited Storage setting:
The first picture has a very noticeable color shift (left is warmer, right is colder) - I am looking at it on a professional 10-bit 4k display which might be a factor, but I would run away from any storage that would cause that :-O Detail looks horrible on both, difficult to say which one is worse and how well do they match. On better photos that would probably be noticeable (my color vision is 100%).
I'm looking at it on a Dell U2715H, which is not a professional display, just a consumer one with above-average color quality and good calibration out-of-the-box, and I could spot the temperature shift immediately as well. Also, as you say, the details are bad.
I'm wary of services that auto-compress images, because a) I want my bits to stay the way they were originally captured, and b) every now and then I have to print a photo I make, and then suddenly all those details matter for the print quality.
Nice analysis and I admit I'm surprised by how good their compression is. I was expecting much worse, and that's why I immediately started paying for storage, so that I don't have to worry about bad-quality photos later.
(That's what made me pay Google directly for the first time; extra storage for backing up photos.)