I don't think those are contradictory. In order for Google to synchronize your data to various devices and provide it to its API's for you to access it in its a

I don't think those are contradictory. In order for Google to synchronize your data to various devices and provide it to its API's for you to access it in its applications, it needs permission (a license) from you. Asking for that license every time you try to access each photo in an image manipulation program would be excessively cumbersome. In addition, this policy is directly related to "submitting content". I do not interpret that to include storing files on a storage service or sending email through a hosted email source. Submitting content needs to be defined, but it is not the same as copying a file into a storage bin. After putting an image into your Google drive, you might then submit it to Picasa, or you may even have an automated process of submitting all files in your Google drive to Picasa, but the submission of that content has to be considered a different act than just storing data on a hosted storage drive.