Using iCloud is not required. Using iCloud mirrors your connected Mac files to iCloud.com, and then they are mirrored to other devices that are connected. The purpose of all this is to make your connected files available on your iPhone and other connected devices, and to be accessible for use from any computer anywhere. It's absolutely fine if you don't want any of that.
This might help:
Understanding iCloud Drive - Apple Community
This article makes the point that iCloud does not replace a robust backup routine. The article was about iCloud Drive which is used for various kinds of files. iCloud Photos is a separate part of iCloud, and it has special advantages for pictures, but it's a similar idea. iCloud's "Optimize Storage" is especially useful for smaller devices like iPhones.