What happens when you unselect ”Copy Files to iTunes Media Folder When Adding to Library” on a mac?

Is that folder just a duplicate of everything that’s already in my iTunes?

That is the material you have in iTunes.

If I unselect that “Copy Files to iTunes Media Folder When Adding to Library” will it automatically delete the contents of the “iTunes Media Folder” on my drive?

No, it just means nothing will be added to it automatically in the future.

If so, what are the implications of that?

It means, going forward, that any music you add to iTunes you will take responsibility for the file management.

if I can pull everything back down from the cloud if/when I want it again, why not just cut the 18 GB from that folder?

You want to solve the problem only to re-create it again?

OS X needs about 10 gigs of hard drive space for normal OS operations - things like virtual memory, temporary files and so on. 

Without this space your Mac will slow down as the OS hunts for space on the disk, files will be fragmented, also slowing things down, apps will crash and the risk of data corruption - that is damage to your files, photos, music - increases exponentially. 

Your first priority is to make more space on that HD. Nothing else can be done until you do. 

Purchase an external HD and move your Photos and Music to it. Both iPhoto and iTunes can run perfectly well with the Library on an external disk.

That's the safest and least destructive method of reclaiming space.

https://www.lifewire.com/transfer-itunes-songs-to-another-location-2438709

should help with your first query.

Just delete the contents but note the note on part 4 of the article linked here.