What does it mean when setting up iCloud that it asks merge with iCloud?

I am setting up iCloud on my phone.  It is asking me if I want to "merge with iCloud"?  Will I lose contacts or pics if I say "Merge".

Welcome to the Apple community.
If you already have some contacts on your phone when you sign up for iCloud, iCloud will ask you if you wish to keep these contacts on your phone only and start an additional iCloud accounts for contacts, or merge the two accounts together so that all the contacts will be in the new iCloud account.
Nothing will happen to your photos when you sign up for iCloud photos are not involved in this procedure.

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