It is wanting to sync everything in iCloud into my iPhone 5 thereby deleting my contacts, photos, everything.
Back ur phone up to iCloud over the air. Go to icloud settings 1st and flip the toggles for whatever u want to back up. When it's done the phones contents will now be in the cloud. And anything else will be overwritten. Then if u want to restore that backup, all the current phone data will be restored.
So the first thing I do is backup everything to iCloud? So I turn "iCloud backup" on? It's off right now.