I think the difference is that the prompt you describe still travels over the wire to get to your device, while this new thing used Bluetooth based on FIDO standards.

So the access key the client logging in passes to the server is from the local device you trust.

I thought that. AFAICT it's local via Bluetooth, as opposed to through Google servers and push messaging. Good idea, but better if it's open.

Of course their motivation as normal may be to have users have their wifi/bluetooth on all the time so they can reliably collect more location data.

As others pointed out, the difference is that the local connection to the phone, together with the Webauthn+FIDO protocols make this resistant to phishing.

That comes at the cost of needing Bluetooth, which isn't available on all computers. I.e. it's more secure than the prompt you have now, but that will at least work everywhere.

The right tradeoff between the security and the convenience/availability is something that is very context-dependent, and different for each user. Hence the multiple options.