I'll try to explain it. You have a single iCloud account and this account has an iCloud ID, which in your case, is your Hotmail address. This ID happens to have the same form as an email address (which I think is what's causing the confusion here). Although your iCloud ID looks like an email address, it isn't; it's an iCloud ID.
You are syncing all your iCloud data to this account (calendars, contacts, reminders, notes, and anything else you have set to On in Settings>iCloud). You can view some of this data on icloud.com when you sign in with your iCloud ID (your Hotmail address). Your iCloud backup is also stored in this account.
An iCloud account may or may not have an iCloud email account included with it. The email account is created when you turn Mail to On in Settings>iCloud. And, as you have discovered, you are required to do this in order to sync Notes with your iCloud account.
The iCloud email account (your @icloud.com address) is just like any other email account (Gmail, Yahoo, Hotmail, etc.). You use it in the Mail app on your phone to send and receive email to your @icloud.com address. Any email stored in this email account is stored in your iCloud account, and can be viewed on icloud.com by signing in with your iCloud ID (your Hotmail address). You don't have to use this email account if you don't want to, but it must be enabled in order to sync notes with your iCloud account.