Anyone who has gotten a new phone or has done a factory reset and after logging in to Google, they're magically re-connected to any WiFi access points, should NOT be surprised. Hell, I knew they were saving these data 3+ years ago....
Seems pretty obvious that Google has to store the password before they can restore it... Well sort of.
There are ways of storing these values so that Google can store it without knowing the value. You'd use the Google password + a random salt to encrypt the WiFi password. I would hope they aren't storing these in plain text.
This has been how many password systems have worked for a long time.
Let's get all the information before we jump to an incorrect conclusion.
Yep. I get spotty coverage in the yard but you basically have to be in the house or on the deck to get a usable WiFi signal from me. I keep mine WPA2 protected but I would probably have the exact same number of outsiders on my network with no password.