Upgrade Data Storage
If I purchase upgraded Apple storage, it says I can share with up to 5 family members. Is that sharing the storage space or sharing the actual data files like photos, videos, etc.?
iPhone 7, iOS 15
It is sharing the storage space. See the following from Share iCloud+ with your family - Apple Support
When you share an iCloud+ subscription, everyone in the family group uses their own account. That way your photos, documents, and other information stay private, even though you're sharing access to the service. You simply share the features and space available in iCloud+ with your family members, so you only have one plan to manage.
If you want to share data, there are some options available for some things, whether or not you are sharing a storage plan. One example: How to use iCloud Shared Photo Library - Apple Support