https://en.wikipedia.org/wiki/Homomorphic_encryption

> Homomorphic encryption is a form of encryption that allows computations to be performed on encrypted data without first having to decrypt it. The resulting computations are left in an encrypted form which, when decrypted, result in an output that is identical to that produced had the operations been performed on the unencrypted data. Homomorphic encryption can be used for privacy-preserving outsourced storage and computation. This allows data to be encrypted and outsourced to commercial cloud environments for processing, all while encrypted

And the way the data comes back to you is via the third-party relay which knows your IP but nothing else

So, while Apple doesn't know the ID of the person sending the data, they have a 'room number' that links back to an ID.

If Apple were to decide to scan photos for pictures of 'lines of white powder' they couldn't tell the police your name but they could say that the 3rd party knows who you are.

> Then somehow magically, the pictures on your phone are updated with tags based on Apple's processing....but Apple doesn't know who you are.....

Yes, this is the whole point.