That was one complex headline, but it finally makes sense now. Microsoft has activated full resolution backups of photos and videos to SkyDrive for Windows Phone 8 users, and it should take anywhere between an hour to a few days for the option to show up on your device.
By default, the backup option is turned on on your device, but if you pay close attention, it uploads resized photos and videos. And so, I had turned it off, rather preferring to transfer the media to the PC and upload manually, because I don’t want to see low quality photos some time later in the future and form a bad opinion about a device.
If you too thought on similar lines, and turned auto-upload off, you can turn it back on, and select the options you see above by going to Photos -> More -> Settings -> SkyDrive.