. However, the photos and videos are still on my iPhone and not transferred to iCloud. I have 159Gb available on my iCloud from 200GB I have subscribed.
How many photos do you have on your iPhone?
I have about 4,500 photos and videos on iPhone
iCloud Photo Library (Beta) does only store the photos you are seeing on your mobile iOS8 devices.
Any phot you have on your iPhone or iPad will also be stored in iCloud, if you enable iCloud Photo Library. If you delete the photo from your device, it will be removed from iCloud as well. There is no way to have the photo in iCloud, but not on your device. You can only opt to have only an optimized version on the device, to save some space. Then iCloud will store the full resolution originals, and the iPhone/iPad lower resolution previews.
"Optimize [device] Storage" from Settings > iCloud > Photos or Settings > Photos & Camera > iCloud Photo Library
I have done this and I am assuming iCloud is doing it's job. But when I see in iTunes that photos and videos are occupying maximum space, I am worried.
I am quite confused with all this as much as also with the various Albums - example Photo Library, Photo Stream, Photo Sharing, Camera Roll. What and why are these there?
If you are seeing "Camera Roll", you don't have the iCloud Photo Library enabled.
I don't see Camera Roll any longer!
The different albums in iOS8 are explained here - see the link: Get help finding your Photos in iOS 8