Oh, many questions, I hope get answered by themselves when understanding how it works
1. When iCloud Photos is ON, all photos (and videos) are uploaded to iCloud, regardless on what device they're taken/added to the Photos library.
1.1. I.e. you can take pictures on iPhone and iPad and they will all be visible on all devices in the same photo library.
1.2. All devices that have iCloud Photos ON just display all photos and videos that are present in iCloud
2. iCloud always stores the photos and videos in full resolution, including all edits you make to them, regardless on what device.
2.1. When you edit a photo on one device, this edit will automatically be visible on other devices as well.
3. On iPhone/iPad (not sure on Mac) you can safely use the setting Optimize iPhone/iPad storage (as opposed to Download and Keep originals). This drastically reduced the amount of storage photos and videos use on the device, without loosing anything:
3.1 When using Optimize, iOS will automatically, store a lower resolution version on the iPhone/iPad, yet still having it linked to the full resolution photo/video in iCloud. It is however transparent to the user, as when you e.g. zoom in or edit a photo that's stored locally in a lower resolution, it will automatically download the full resolution photo, to later change it back to a lower resolution photo if deemed necessary.
3.2 When you take a photo/video, of course the full resolution will be uploaded to iCloud and only after and when iOS determines is needs space, it will replace the locally stored photo/video with a lower resolution one. This way my wife has access to +200GB of photos in iCloud on here 64GB iPhone
4. When using a new iPhone/iPad/Mac, turning on iCloud Photos will automatically start displaying the photos stored in iCloud on the device.
4.1. You can use as many devices as you like, when a device has iCloud Photos ON, it'll just all show all photos/videos stored in iCloud.
5. When you turn OFF iCloud Photos on a device, it will ask you what you want to do with the photos on the device, keep them on that device or remove them from that device. This will NOT remove the photos from iCloud. I.e. all other device keep on showing all picture you have in iCloud, just this device will not.
5.1 When you choose to keep the photos on the local device, and later you decide to turn ON iCloud Photos again, the any new photos will be uploaded to iCloud, any photos that you have in iCloud but decided to delete while iCloud Photos was OFF, will re-download to the device.
Hopefully this helps