ON running a referenced library - one where you import images with that box unchecked:
You can, if you prefer, and have a fondness for pain and pointless chores, run what's called a Referenced Library. In this set up the files are not copied to the library package, but rather left where you have them on import.
But...
In this scenario you can't use the Cloud Photo Library.
Also:
Photos has no tools to manage images stored outside the package. So this is where the pointless chores come in: Everything is more work for you: You move the images from the camera to your preferred storage. Then import them. Deletions? Delete the image in Photos and then go to your storage and root out the deleted image yourself. Anything like moving your store to another disk to a new computer becomes a world of grief because - and this is where the pain really comes in: If the path to the file is broken for any reason you will need to reconnect it manually. Not really a problem if it's one photo. But if it's 10,000 or 100,000, well that's a lot of discomfort indeed.
All those other managers - you know the ones you pay for - have tools to manage a referenced library. Relocating files and folders is simple, so is reconnect files and all that, because these apps have the tools for that, and that's one of the reasons you pay for them. If that's important to you, then Photos is not the app for you - it's not for me, for instance, I use a different more capable app.
My rule of thumb: If you want to use Photos don't use a referenced library, if you want referenced library don't use Photos.