Android M introduced Auto Backup for Apps: https://developer.android.com/preview/backup/index.html
How does this service handle conflict resolution?
Example: I have 2 Android devices linked to the same Google Play account, running the same app; and that app has different data on it between the two devices. When Android backs up the data how does Google determine which to keep?
tl;dr: both are kept
Backup data for an app is associated with one specific device. If you factory reset that device it is henceforth considered a new device.
What this means is that if you have two Android devices on the same Google account they will both have duplicated backup sets, that are independent of each other. The next time you go through the Setup-Wizard on a new device and add your Google account, you will have the option to restore from either of the two devices.