ICloud photo library uses physical storage on iPad?

I'm confused by exactly what the point of iCloud photo library is since it's using storage on any device I share an album with.  Is this a setting that it downloads pictures automatically?  I've tested this on my ipad and my wife's, on both devices sharing an album and accepting it used storage. 

Thanks for your reply.
Just found an informative article by iMore that kind of explained it in more detail. However, no official documentation from Apple regarding this subject at all, which is frustrating. The claim is that you shouldn't ever have to delete photos for the sake of saving space. It'll just automatically manage your storage for you. I still don't know exactly how.
"iCloud Photo Library's Optimize Storage option automatically and smartly takes a percentage of your device's storage space for high-resolution versions of your photos; any images or video that can't fit in that space are stored as low-resolution thumbnails. This space is variable, too — it doesn't take up every speck of free space you have, instead appropriating a portion of your free space to photo storage, and it adjusts smartly on the fly."
Again, what is the percentage of free storage it uses? 10%? 25%? 60%? We have know way of knowing for now.

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