Honestly, it probably connects to wifi too. What they meant is that all the AI is done on the device and the photos themselves aren't sent out to Google (until you specifically tell it to from the app). Note that to view the photos, you have to use the app anyway, so it clearly can communicate with your phone and send photos.

The point he was trying to make is that the photo selection is done on the device and not by Google servers. Obviously the device has network connection, it just doesn't use it for that specific usecase which is analyzing images, but it can use it for other stuff.