Sounds like a load of BS from Schmidt as usual when Apple is involved.
He is very careful how he words it all. All apps (and updates) submitted to the App Store go under review before they are added, no matter who it comes from. Schmidt puts a spin on this so it sounds like Apple is being bad (fuel for the flames). The fact is there is no evidence that Apple is going to deny this app, but it is to Schmidt's advantage to talk about the submission process in a way that makes it sound like Apple is denying it. It puts pressure on Apple as a competitor, and that's all that matters in business.
I am sure in a week we will see Google Now released on iOS, and it won't be a surprise to anyone, not even Schmidt.