From Apple’s own support page…and it has been doing this for about 5 years now (just better now obviously as tech has improved).
Moments: Search for an event, like a concert you attended or a trip you took. Photos uses the time and location of your photos along with online event listings to find matching photos.
People: Find photos in your library of a specific person or a group of people. Just keep names and faces organized in your People album.
Places: See your photos and videos on a map in the Places section. Or type a location name in the Search bar to see photos and videos from that place.
Categories: Photos recognizes scenes, objects, and types of locations. Search for a term like "lake" and select a result to see photos that match.
The Search tab also suggests moments, people, places, categories, and groups for you to search. Tap a suggested search, such as One Year Ago or Animals, to explore your photos.
When you search your photos, the face recognition, and scene and object detection are done completely on your device. Learn more about photos and your privacy.
The last part is basically what they are doing now as well. They have on-device parameters that recognize objects in your photos. No different than the on-device database hashes they will be adding.
The difference? The older data points just help when you are searching for the stuff listed above. The new one specifically mat-res photos that match the database hashes and then flags them when uploaded to iCloud. Have enough of them in your library and Apple checks to verify. If you uploaded known child porn to your iCloud account, the authorities are contacted.
So, again, why wasn’t anyone freaking out about this existing (for 5 years now) “back door” way of scanning images on your phone? What would have stopped them previously from adding the ability to recognize “trump” or “pink triangles” or anything else they could think of? Why do all of these lame conspiracy theories have more validation now?
And still, why would the government even NEED this?? There are easier ways to scan your phone and especially iCloud by hacking into them instead of involving hard coded data being added to a phone by Apple (not the government…Apple does it!)
EDIT: When you click on the privacy link:
Photos lets you choose who has the full picture.
The Photos app uses machine learning to organize photos right on your device. So you don’t need to share them with Apple or anyone else.
More about Photos
Your photo and video albums are full of precious moments, friends, and your favorite things. Apple devices are designed to give you control over those memories.
Photos is also designed so that the face recognition and scene and object detection — which power features like For You, Memories, Sharing Suggestions, and the People album — happen on device instead of in the cloud. In fact, the A13 and A14 Bionic chips perform over 100 billion operations per photo to recognize faces and places without ever leaving your device. And when apps request access to your photos, you can share just the images you want — not your entire library.