Rookie Icloud Question

So, I basically only want to use iCloud as a back up for my iPhone, but I'm constantly getting messages that it's full. I've finally figured out it's because it's also backing up my entire library from my iMac. When I go into iCloud settings on my computer and deselect Photos I get a message saying "If you turn of iCloud Photo Library, photos and videos that have not been fully downloaded will be removed from this Mac...."

So it's downloading photos from the Cloud to this Mac? I have manually imported all of my phone pics into Photos, so everything I want is currently in Photos. I guess I'm just concerned about things being "removed from this Mac." It's not going to delete anything currently in my photo library, right? I know I'm being ridiculous, I'm just paranoid.

Also, which folder can I find all the image files that have been imported into Photos?

Please forgive my ignorance. Thanks!