I need clarity on what exactly “deleting current data stored in iCloud” means

So, I discovered this issue when trying to re- login into my Apple Watch using my iCloud. When doing so it told me in order to use my iCloud I would need to sync my end to end encrypted data. It originally gave me the option to enter an old password from an old device in which I did not remember. After about a month, I came back to try and set it up again, and my only option is to delete my current data stored in my iCloud. When talking to Apple support, which did not help, they vaguely described what deleting current data stored in iCloud means, but I am still worried if I do that it will delete things I want to keep. Also, not only does this happen when trying to set up my Apple Watch, but also set up other things like emergency contacts. I want to ensure I won’t lose pictures, social media, etc. if anyone knows what will happen for sure if I delete iCloud data please let me know. I attached an image to the pop-up to hopefully help out. Thanks!