Yes - that's exactly it. The library stored in iCloud is the "truth" and whenever you opt in a device to the cloud, two things happen.
- It prepares to upload - trying to not have two exact duplicates get uploaded to the cloud.
- It downloads thumbnails for all cloud photos - trying to not have two exact duplicates in the final device version of the library.
Each device can opt to get full resolution images or to further optimize (resample/recompress) the original.
I say try since most people will find some photos they consider duplicates if they have long standing photo libraries, but it's actually pretty good in my experience. The wrinkle is that Macs can maintain as many Photos libraries as you wish, with only one tying into the cloud backed "truth".
You can work directly with that version of the "truth" Photos album through the Photos web app at https://www.icloud.com/#photos
The following information is synced through iCloud Photos:
- Photo Metadata (keywords, favorite status, date, title, name, description geolocation and other EXIF metadata about exposure, ISO, digitizer, lens, flash, etc...)
- Photo Albums
The following information is not synced through iCloud Photos:
- Faces albums and databases