That's exactly what it does, store things. It's like a gigantic filing cabinet where everyone has their own drawer that they can access whenever they need to. :o}
You have a disc on your computer that you store data (photo etc) on; you might have more than one and you can copy/move data from one disc to another.
You can also buy extra storage that you plug into a USB socket on your computer (portable disc/memory stick etc)
Cloud is extra storage "connected" to your computer via the internet, rather than a physical plug-in. It enables you to copy photos etc to the cloud and then you can look at them wherever you have an internet connection without having to carry anything about with you. It also means you can copy data to the cloud for other people to see (with your permission).
You are correct. It's simply storage where you can save all your vital personal private stuff than can never ever be accessed by bad guys, or anyone else, honest. Trust us, Microsoft is a big company who never gets anything wrong, as do none of the other "cloud" storage providers either. (And there will never be any problem connecting to the Net to get to your stuff either, as past experience tells you.)
Thank you for you answers that made me quite happy. I pay a small fee for extra storage so now I understand the what I'm paying for.....a bigger drawer right?
As OG rightly points out, anything stored on the cloud could be susceptible to hackers, so I would never store anything on there that I wouldn't want to be made public. Having said that, anyone who doesn't have stuff important to them (family photos etc) stored on two different media is very silly. I have a free cloud-type account on which I have family photos as an absolute backup, in addition to the several hard discs on which I also have copies. The cloud protects you against such things as a house fire or theft of your computer and extra storage.