They must have signed into Chrome, but Chrome will explicitly tell the user if their data will be accessible to the GSuite administrator[0] so this is likely on them for not fully reading this popup or forgetting about it.
This has to be something where the admins changed some default setting to change the default security on everything in G Suite, so that all other school accounts could have access to it.
Maybe someone intended to set it up so that all google sheets and docs were shared among everyone on the plan, but didn't realize the change they made applied to other things that got synced to G Suite, like Chrome sync passwords?
It does not address what pressing "link data" will _actually_ do and what pressing "cancel" will _actually_ do.