Mat Honan gives a nice summary:
It gives you free unlimited storage for what Google calls “high-quality” photos and videos. At the free tier, the service compresses images, maintaining resolution up to 16 megapixels. Google claims these maintain near-identical visual quality.
It’s true: check out these comparisons. Honestly, if we never said anything about compression, I don’t think a single human (myself included) would ever notice, but it’s important to be transparent so that people can make informed choices.
Videos are maintained at 1080p. If you want to keep your original photos, Google offers 15 GB of storage for free and an additional terabyte for $10 per month. [Also, 100GB = $2/mo.] To keep your photos current, Google Photos has automatic backups for iOS, Android, and the desktop. You don’t have to actually do anything to make them happen.
If you shoot raw images with a DSLR (as I do), you can choose “Original” from the desktop app and “High Quality” from your phone so that your phone pics don’t count against quota. (Every iPhone image besides panos will fit comfortably under the 16 megapixel cap.)