As FoxFith says "iCloud is a syncing service". To elaborate a bit - this means, that the purpose of iCloud Photos is to ensure, that the Photos Library on all synced devices is kept identical. It is supposed to work like this:
- iCloud Photos keeping a central library of all your photos and videos from your Photos Library in iCloud. This is the central, main storage place of your media files.
- From iCloud the library is syncing back to your devices and you will always have a mirror copy of the iCloud Library on each synced device. All media files are in iCloud - and a working set of of your photos is stored locally on your devices.
- When you work with your Photos Library, you work with the local mirror copy. You can browse the library, even if you have no internet connection. Any adjustments you apply to your photos, albums you create, faces you name, will be updated in iCloud, as soon as you have an internet connection and sync from there to your other devices.
To save storage, you can use "Optimize iPhone Storage", as FoxFifth explained. But even the optimized library will need a considerable amount of storage on your device, roughly 10% to 20% of the size of the library in iCloud. It has a few additional drawbacks:
- You will always need an internet connection to work with the photos, to view them enlarged, adjust them, share them. This will make working with your photos slower and cause a lot of network traffic.
- An iTunes backup will no longer include all photos and you will have to backup your photos by downloading them from iCloud separately. Downloading using a USB connection will just give random result. You acn only download the photos that have recently been viewed and currently not optimised, when you connect the iPhone to USB.
