Along with being made available in Liquid State Ubiquity, Google Play In-App Purchases (IAPs) must be set up in the Google Play Developer Console.
Before creating your IAP in the Google Play Developer Console, ensure you have followed the instructions listed in How to: Create In-App Purchases.
You do not need to submit free downloadable content to Google Play. Only paid IAPs must be configured in platform developer portals.
Google Play refers to IAPs as In-App Products, rather than in-app purchases.
To add an IAP to your Android app: