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When/where has it been marketed as anything but a "hide history from local users" feature?

All I've seen is the marketing for "buying gifts for your spouse in secret"-feature.

You are saying they have marketed it as a total privacy feature, like the VPN companies do?

I think wording like "browse the web privately", the disguise icon, and the name of "incognito" can very easily suggest that the purpose is hiding your identity from websites.

Reminds me of Tesla full self driving. It’s not really fully autonomous but we will call it that anyway.

I’d go further - people would think it meant that not even Google would be recording their browsing.

Even the “buying gifts for your spouse in secret” case is thwarted, you may end up seeing retargeting ads or YT suggestions for the products you were looking at, in your main account.

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