You know, I never look at that. It does seem to include more than your Hard Drive. But if it meant only Photos Libraries, which category would all the other pictures be in?
And there's this: when I look at that display on my own system, it says for Photos, 45.7 GB. When I add up the storage from my several Photos Libraries, it comes to 206 GB. In addition to that, I have another 350,000 other images on my hard drive. So I have no good idea of what those numbers in that display mean. I suppose someone does.
If I want to clear out some room on my hard drive, in Finder I put the folders in order of size and look inside the big ones (because making a change in a smaller one makes a smaller change.)
One of the things that takes up a crazy amount of space, by the way, is video. Look into that...