Mobile documents taking up hard drive space

iCloud Drive and iCloud Photos are both syncing services that keep a local copy on your Mac.

You can potentially reduce the storage used on your Mac by turning on the Optimize Storage option in iCloud Photos as described in Set up and use iCloud Photos - Apple Support

For iCloud Drive, the option is at Apple menu > System Preferences > Apple ID > iCloud (in the Preferences sidebar) > Optimize Mac Storage.

I haven't personally tested that but I would strongly advise against it. Those files are designed to be accessed via the Finder "Go" menu iCloud Drive or the Finder sidebar.

If you want to delete those files, delete them from the Finder iCloud Drive.

If you want to keep the files but potentially reduce the local storage that they use, go to Apple menu > System Preferences > Apple ID > iCloud (in the Preferences sidebar) > Optimize Mac Storage.

If you want cloud-only storage with no local copy, look at the options in other services such as OneDrive, DropBox, Google, etc.

The local copy of iCloud Drive (which you access via Finder sidebar iCloud Drive or Finder "Go" menu iCloud Drive) is what you are seeing in Mobile Documents in Library.