hi there! if you will delete iCloud backup , it will delete you previous app data, phone settings and some of other stuffs in your iPhone. if you will turn off iCloud backup it will not backup your iPhone in future and you may lost the data of your iPhone.
to know what iCloud backup is visit https://support.apple.com/en-us/HT207428
if you want to free up some space on your iCloud , I will advise you to take a backup of your iPhone to your computer first and then transfer into other hard disks. you can also consider upgrading iCloud plans for more storage.