I'm not an expert on exactly how iCloud handles end-to-end encryption, but I suspect it's something like this:
- Each device connected to an iCloud account uses a unique public-private key pair. The private keys always remain on the device.
- Each device registers their public key with the iCloud account.
- When sending data from one device to another, the data is encrypted using the sender's key, stored on iCloud using the cloud key, then sent to the receiver's device using the receiver's key.
End-to-end encryption. This is exactly how SSH works, except multiple (more than two) parties are involved in a single transaction instead of just two parties. And this fits with the language that the data is "protected with a key derived from information unique to your device" because you can't transfer public-private keys to another device and have them work without some effort. Each device has a unique signature that the key is validated against. iCloud likely does the validation as part of the process.
Public-private key authentication is very common, and iCloud likely employs it between all authorized devices.