What does this mean at sharing folder to collaborate?

So I have a folder in my iCloud Drive root folder, I share this folder to one people for collaboration, and then when I do the same to the second people, I get a dialogue box showing:

”

New Participants will be able to see all items in the folder.

” In Bold, and then the following text in non-Bold:

“Folder containing this item is already shared”

what does this mean? This item means what? If this item means this folder I’m sharing then the folder containing this item means my root folder of iCloud, and it’s sharing???