Google isn't making this available because they're nice. Your photos contain a treasure trove of metadata, and with image recognition they'll be able to glean a lot of information from the content of your images--all to serve ads.
I understand why this may be a concern in the abstract, but practically, this doesn't bother me at all. Google and Apple both serve up ads to users (Google through apps and web services, and Apple through only the former). The difference is that Google uses your information to serve up ads that are more relevant to you.
No one at Google is pouring through your digital information; it simply goes through algorithms that change what you see on your end. Google can do a lot of cool stuff with Google Now that makes my life easier, simply because it knows what I'm interested in, my routines, interests, etc. Frankly, better contextualized ads and services seems like a win-win to me.
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Just your normal smartphone photos. Considering next year's phones will all have 20MP+ cameras, 16MP is a bad limitation.
I don't know about that. Current rumors indicate that the next iPhone will have a 12MP camera, the Nexus 6 currently has a 13MP camera, and the just-released Samsung/LG flagships have 16MP. Even a lot of expensive DSLRs are shipping with 16-20 MP, which isn't too far off Google's maximum.
At a certain point, there's no need to add more MP and I think smartphones are reaching that point. My guess is that the focus is shifting largely towards aperture, image processing, etc.