Doesn't this directly violate Google Play Developer Terms?
An android app and the google play store are two different things. An example is obviously mycelium (pick direct download
https://mycelium.com/bitcoinwallet). Unlike Apple, where you are required to go through the apple store in order to make an app available (unless the phone is jailbroken), android has no such restriction. It is arguably one of the reasons why it has such a large market-share.
This is true, and there are also other non-Google marketplaces to distribute your app (F-Droid, Amazon).. but as an Android developer, you're kind of short-changing yourself if you're not distributing through the Play Store that comes bundled by default with the majority of Android devices. If this does what I think it does, allowing in-app purchases without going through Google, then it likely does violate Google's terms of service for Play developers. In that case, you should still be able to distribute your app through the other app stores but you lose a good source of traffic and downloads by not being able to distribute through the Play Store. I wonder why someone would be willing to lose the benefit of being listed on the Play store just to accept Bitcoin in their app, especially if they were converting to fiat at the end of the day anyway and had no intention of actually holding any Bitcoin.
You can install any app you want on an android device directly from a webpage if you are so inclined. There are also other market-places (like mikandi or skubit) that allow bitcoin acceptance directly in your apps. If you wanted, for example, to create a gambling app, or adult-centric app, you wouldn't be able to put it on the google play store, regardless of how you accepted payment.
Two more marketplaces here, these two I've never used or even heard of. But, I'd be willing to bet that all of the alternative Android marketplaces combined (including Amazon) don't come close to Google Play in terms of the number of devices who have that marketplace installed or the number of users who look there when they want to install an app.
edit: Although your mention of gambling or adult apps makes sense. You already lose the benefits of distributing on the Play store with those apps anyway, so why not go ahead and accept Bitcoin?