To me the wording of the options while you are identifying for the yellow button can mean both #2 and #3 just as well, but the wording of the submitted identification implies #2, so that there is discontinuity between the identifier’s experience and the observer’s experience, as @michele_m described.
I most often use the yellow button for #3, for the situation @vynbos described, and I think #2 and #3 are similar enough that just changing the wording as he suggested would solve the issue for the most part. The long discussion on the Google Group about this feature seems to end unresolved about the pros and cons of having a third option.
I don’t use the green button (#1) very often, I think mostly if someone has a species ID and asks me to confirm and I only know enough to tell them they have the genus right, or if there is a species ID and I’m not sure whether or not the photo is enough to confirm the species so I’ll leave a not-explicit disagreement just to indicate I’m not comfortable going to species with that photo. There seems to be some disagreement about how to interpret the green button as well though…