Question

See information in Get temporary iCloud storage when you buy a new iPhone or iPad - Apple Support

It is temporary storage. If you need to, you can extend the storage for an additional 21 days.

You can also do the following from the above support article:

If you want to keep using iCloud to back up your device, you can upgrade to iCloud+.

No. It means that the backup that you made of your old phone (or whichever phone you backed up to the temporary storage) will be deleted from iCloud. If you want to backup the new phone to iCloud (that's advisable in my opinion), you need to have enough iCloud storage with that Apple ID to hold that backup.

See: How to back up your iPhone, iPad, and iPod touch - Apple Support

and if you need more iCloud storage, see: Upgrade to iCloud+ - Apple Support

You can just let it expire and it will delete the temporary storage and backup and you can continue to backup using the "enough storage" that you have. I'm assuming that the temporary storage is with the new account that you made (those come with 5GB free storage) and that your phone is using the account where you have a paid storage plan larger than 5GB.