what happens to a person data in icloud if they are added to family sharing

If the family share includes iCloud sharing, the new members data simply moves to the new shared data storage quota, still under that persons AppleID for access (so only that person can access it). Any iCloud+ subscription that new person has will be cancelled, and a prorated refund applied to their AppleID.

All the data is in iCloud so nothing changes with the data (it’s “the cloud”, so data doesn’t move or change). Apple just updates their system to reflect whose billed subscription that data now “lives” in.