Google is offering you the option to choose between deleting the activity data after 18 days, 3 months or manually based on your preference.
Again, users have been able to delete location history manually through a fairly hidden setting on the Google Maps timeline, where an unlabelled trashcan icon in the bottom right of the screen will clear history. Google already knows enough about you and I'm not sure it needs to know your entire life. Here you will need to open your Google account page. Then select "Manage Your activity controls", followed by "Manage activity" and "Choose to delete automatically".
Google says that it collects this data to improve and customize its app experience but not everyone is comfortable with it keeping a record of their activity. Any data that is older than either of these time frames will be automatically deleted in the background while only the newest data will remain in the database, allowing Google to continue providing them with better search recommendations, etc. Google takes the data and provides personalised services. It will be interesting to see if Google builds on this and gives users even more control over their data in the future.
Earlier in January, France's data protection agency, the National Data Protection Commission (CNIL), had announced a fine of €50 Mn ($57 Mn) on Google citing the European Union's new General Data Protection Regulation (GDPR) for the first time. You will only need to change these settings if you want to adjust the auto-delete frequency or disable it.