Well, if you need to share private information to eg Facebook's cloud infrastructure just to gain their AI intelligence then you've given up your information and arguably privacy.

By providing more On-device intelligence Apple believes you may prevent or reduce that initial egress of data outside your hardware where it's stored encrypted.

Feel free to argue the point but no need for the histrionics.

A good example is the image tagging in Photos which has been there for quite a while, if you search for a term in your images folder it'll show you images they classified with that term. This applies regardless of if you are using iCloud or not as the classification is performed locally, keeping your images on your device as opposed to sending them off to be classified on a server somewhere.

It means it would do e.g. the adjustable photo background bokeh effect on your device via its onboard NPU rather than upload it to Apple servers for them to process it for you.

In part, I would think they are referring to CoreML, onboard machine learning framework.