Why is my iPhone storage full when I have iCloud

Because you cannot add storage to your phone. It will always have the amount it came with. You have bought space in Apple's synching service, iCloud. Check this link....

What's the difference between device storage and iCloud storage? - Apple Support

The only way to get more space is to delete photos, messages, apps, etc.. Be sure to save important photos and data to your computer or an external drive. This video may help...

Because iCloud Storage is stored in the cloud, on Apple's servers. It doesn't have anything (at least directly) to do with the storage on your phone.

I say directly, because there are some indirect things you can do - you can offload little-used data and apps to iCloud, thus freeing up space on your phone, but having, say, 2TB of iCloud Storage does not magically give you 2TB of storage on your phone itself.

Check the phone Settings -> iCloud to enable offloading data to iCloud. The biggest culprits are likely to be Photos, so start with that, and make sure the 'Optimize iPhone Storage' option is enabled.