SOLUTION:If you don't want to see storage on the iCloud drive at all, go to Finder > Preferences > Sidebar and
- under iCloud UNcheck iCloud Drive and Shared
- under Locations Uncheck iCloud Storage
EXPLANATION:What you are seeing is, the current amount of data stored
on your iCloud Drive, but that
does NOT occupy any space on your local HD/SSD. It is prompting you to go to System Preferences > Apple ID > iCloud Drive > Options and enable "Desktop & Documents Folders". That
mirrors your Desktop & Documents folders on your iCloud drive and the local HD/SSD (in which case the mirrored data is occupying space in both locations). Then if your local HD/SSD becomes too full the OS will automatically search your desktop and documents folders for files that are "least recently used" and delete them from your local HD/SSD. You
always work from the copy of the file on your local HD/SSD. However, if it is an old file the system deleted to make room on the local drive you might notice a slight delay while the file is downloaded to your local HD/SSD and if you are very alert when you save a file, you might notice a small upload symbol on the file icon while it is being copied to iCloud, but otherwise, the entire process is totally transparent to the user.
