Robert4,
Think of iCloud Drive like you have an external drive attached to your Mac. Store whatever you want on it.
It has a fixed size without paying for more space. That free fixed size is like having a 5GB external drive attached to your Mac. If you want to pay Apple a monthly fee, you can buy various tiers of additional space if you need/want more than 5GB.
You don't have to store ANYTHING in iCloud Drive if you don't want to do so... exactly like you can attach an external drive but not put any files or folders on it. It's just an optional extra available to Apple people.
The main benefit of iCloud and/or iCloud Drive is that what you store on it will be available to other Apple devices... much like if you stored some files on an external drive, ejected the drive and then attached it to another Apple computer or iDevice. Then the other Apple device has access to files on that drive.
A good reason to use iCloud or iCloud Drive is because you have a few tech devices from Apple like 2 Macs or a Mac and iPad and/or iPhone and there are some files you want to be accessible to ALL of your Apple devices without using an external drive to swap between them.
For example, suppose you are working on- say- a book/report. You own a Mac at home and you have another Mac at work. You could save the book/report file in iCloud Drive and the other Mac would have access to it. Open it in the other Mac, write some more content, save it. Then go home and open it on the home Mac and you'll see that the new stuff you added at work is now available to you at home. Write some more at home, save and when you get back to work and open the file, you'll see that what you added at home is "there" too. This is EXACTLY like saving this evolving book/report to an external drive and then carrying it back & forth and attaching it to each Mac... except- with iCloud- there is no physical drive, nor carrying something: that's the "cloud" part... it's basically a "virtual external drive."
Same with say a situation of owning one Mac and an iPad. Updates to an iCloud Drive file with either will be available when you open it on the other. You don't have to send the updated file to your other Apple device... and then back again after editing it on the other device. Both devices have access to that SAME file.
The simplest analogy is- again- external drive. iCloud and/or iCloud Drive can be thought of like a wireless external drive that magically follows you around wherever you are so that your other Apple devices can access the same files you choose to store on it, wherever you are.
Other tech that does the same is apps like Dropbox, Microsoft OneDrive, Google Drive, etc. They are all basically "hard drive" storage "in the sky"... so you can easily share the same files between devices and/or locations instead of carrying an external physical drive around to connect & disconnect with the various devices.
I do NOT suggest trying to store everything in any "cloud" but instead be highly selective about what you store in the cloud... just like you probably would not want to store everything on one external drive but only some things that need to be accessible on other computers or iDevices.
If you had a situation where you need a large amount of files stored "in the cloud", I'd encourage you to buy your own NAS hard drive storage that has personal cloud functionality... and then owning your own cloud storage vs. renting it from Apple, Dropbox, Microsoft, Google, etc. Not many people need this. Since you are asking these questions, you probably do not need it either. Presumably, you've got by just fine until now without any cloud storage at all. So odds are pretty good that you don't need it now.
However, now that you understand the core benefit of it, maybe you WANT to use at least some of the free space for files you want to access on multiple Apple tech devices. And if you don't have multiple Apple tech devices, you probably don't need to use it at all.
