First off iCloud is not just a folder to keep anything you want in there. Apps like iMovie and all of the iWork apps need to support it and then their data will be stored there.
Second, iCloud is made to keep all of your device's data in-sync across all of your iOS and Mac devices. It can sync your Contacts, Calendar, Mail (w/ an @me.com or @icloud.com email address), Reminders, Safari bookmarks, Notes, App's data (mentioned above), PhotoStream, Find My iOS device and backup your devices.
PhotoStream is made to backup your last 30 days/1000 pictures in the event you accidentally delete one. Apple erases pictures that are over 30 days old, so restore an image as soon as possible if you realized it has been deleted. Pictures are sent to PhotoStream once your device has a Wi-Fi connection.
iCloud backups are probably my favorite part of iCloud. If turned on, your device will backup to Apple's servers when the device is charging and on Wi-Fi. This is helpful in the even your break or lose your device since you will be able to restore to a backup that's usually less than 24 hours old. Backing up to iTunes requires you to plug your device in and of course remember to do it regularly.
Do you have any questions regarding iCloud or things you don't understand? I'll be glad to explain them to you.