Seems pretty clear to me - you get to pay $49/year for (however much you can use of) 1TB of photo storage, or you can see advertising whenever you visit.
The marginal increase from "free-with-ads/$49-per-year" to "$499-per-year" clearly means they don't expect _anyone_ to buy their intentionaly-overpriced-anchoring version, it's only there to make $49-per-year seem reasonable to people who were previously paying $25-per-year.
I guess there's some interesting speculation to be made about their apparently valuing a years worth of user ad impressions at $50...
