Hi, PatSox,
It sounds like you're setting up iCloud on a new device and want to make sure you're not misunderstanding the information being provided. I'm happy to offer clarification!
iCloud has made some fantastic advancements over the years, offering users more and more features and options when it comes to managing storage on your Apple devices. One of those advancements is a feature called Optimize Storage, which works with various apps (like Photos) to maximizing the storage on your device by keeping files in iCloud. This does not mean you can't access the files from an iPhone, or that the content will be deleted simply by turning iCloud and its features on. Instead, it simply means the file will be moved from the phone and placed in iCloud, then the
It's important to keep in mind that while iCloud stores the original files, it is not meant as a place to back those files up (outside of iOS backups). So if you make changes, such as deleting a picture, on your iPhone, it will sync those changes up to iCloud and across any other device you use with iCloud.
You can find several articles related to iCloud and how it works by visiting iCloud - Official Apple Support. For information specific to iCloud Photos, check out Set up and use iCloud Photos - Apple Support.
Have a great weekend!