The full section G (except iii):

G. Restrictions on Use of Content and Services

You may not use the Content and Services for any purpose other than the permitted access to Steam and your Subscriptions, and to make personal, non-commercial use of your Subscriptions, except as otherwise permitted by this Agreement or applicable Subscription Terms. Except as otherwise permitted under this Agreement (including any Subscription Terms or Rules of Use), or under applicable law [1] notwithstanding these restrictions, you may not, in whole or in part, copy, photocopy, reproduce, publish, distribute, translate, reverse engineer, derive source code from, modify, disassemble, decompile, create derivative works based on, or remove any proprietary notices or labels from the Content and Services or any software accessed via Steam without the prior consent, in writing, of Valve.

You are entitled to use the Content and Services for your own personal use, but you are not entitled to: (i) sell, grant a security interest in or transfer reproductions of the Content and Services to other parties in any way, nor to rent, lease or license the Content and Services to others without the prior written consent of Valve, except to the extent expressly permitted elsewhere in this Agreement (including any Subscription Terms or Rules of Use); (ii) host or provide matchmaking services for the Content and Services or emulate or redirect the communication protocols used by Valve in any network feature of the Content and Services, through protocol emulation [2], tunneling, modifying or adding components to the Content and Services, use of a utility program or any other techniques now known or hereafter developed, for any purpose including, but not limited to network play over the Internet, network play utilizing commercial or non-commercial gaming networks or as part of content aggregation networks, websites or services, without the prior written consent of Valve; [...]

First of all I'm not a lawyer, so don't take any of the following seriously.

[1] is interesting, because in many jurisdictions some of the mentioned restrictions are allowed, so they can be safely ignored. E.g. reverse engineering programs running on your own device is legal in the EU [3].

At [2] Valve writes it is forbidden to:

emulate or redirect the communication protocols used by Valve in any network feature of the Content and Services, through protocol emulation

I don't know exactly what they mean with "Content and Services", do they include the game itself with this statement? Steam games usually have a SDK from Valve in them, so probably yes.

Protocol redirection has to be allowed else they could go after routers etc. But they specifiy "protocol emulation", which is how goldberg works if I understand correctly. The reverse engeering of the protocol is probably allowed, if it is done purely by observation.

I really have no idea if the restriction on emulating protocols is legal. Though if it was illegal I bet Nintendo would have already gone after Switch emulators.

Luckily there aren't any lawsuits against emulators since that could set a bad precedent for the entire software industry. A similar bad case was Oracle v. Google on Java, which luckily was in favor of Google (not sure I'd ever say that ;D).

And if someone doesn't agree to the terms of service since they don't use Steam, they might be in the clear. Obviously they'd have to obtain a copy of the game, which would most probably be illegal.

[3] https://www.vidstromlabs.com/blog/the-legal-boundaries-of-reverse-engineering-in-the-eu/

Valve probably includes the clause about removing games from your library because of illegal games (for whatever reason, e.g. someone uploaded without being the rightholder) and malware. If a developer turns evil it makes sense to remove the game and the developer from the platform. Usually if a game is no longer sold because of licences running out (car games, ...), Valve keeps the games in the library of people who already bought it, since the licence covers it.

I judge companies according to their (probable) track record. Valve has been great for the most part and I don't see it changing for the forseeable future with GabeN in charge. If the company changes ownership (going public, getting bought etc) I'm definitly going to be more careful and backup the games. Thanks to Goldberg they can still be played even if Steam was shutting down.

Sorry for the big wall of text, I'm just reading and trying to collect my thoughts and understanding of the matter. It's a great question though. If you've read it actually through I'm glad if you can point out any errors or add any thoughts. As I said, I'm a layman.