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re: What does the "Sync app data" to my Google account actually do? Should I keep it on?
Google Play Services 3.1 included four new "sync adapters," which are what you see listed in the Settings > Accounts sync options. The first two, "App data" and "People details," are visible to the user. The other two, "Game data" and "Location reporting," are not.
- App data — allows applications that have been developed specifically to support the feature to save their data in Google's cloud, associating it with your Google account. This is accomplished using the App Data folders feature of the Drive API, which was introduced around the same time last year and recently updated to make it more efficient for developers to implement on Android.
- People details — used for the Google Play Games services, to ensure a single identity is presented for you across games that integrate with the services. This uses information from your Google and/or Google+ accounts. For a list of the data associated with your "person," see here: com.google.android.gms.plus.model.people | Android Developers
- Game data — enables games to save data using the Cloud Save feature.
- Location reporting — this relates to the Fused Location Provider, Geofencing, and Activity Recognition APIs (see the first link in this post).
I recommend you keep the two visible adapters enabled. There is no adverse effect on apps which don't implement the related APIs, but for those which do, you stand to benefit from Play Services if you keep them enabled. If you disable them, you may run into issues using apps which rely on Play Services. For example, I can't say for sure how disabling "Sync people details" would affect trying to play games that use the Google Play Games services.