Short answer: iCloud Drive is a sync service, not a backup. Delete a file and it disappears everywhere.
The storage itself is real and already paid for, though, and a proper backup written into a folder inside it is a genuinely good off-site copy.
Sync keeps every device showing the same thing. That is its job and it does it well. It also means every change you make propagates immediately, including the ones you did not mean:
A backup exists to survive those. It keeps the version from before the mistake, and the mistake cannot reach it.
iCloud does have a safety net: deleted files sit in Recently Deleted for 30 days, and you can get them back from iCloud.com under Data Recovery. That covers a straightforward accidental deletion you notice within a month. It does not cover a file you overwrote, a corruption you did not spot, or anything you find out about in week six.
Worth understanding, because it surprises people. With that setting on, macOS may remove the local copy of a file whose contents are safely in iCloud, leaving a placeholder that downloads on demand.
The consequence for backups is direct: a backup tool copying your iCloud Drive folder may find placeholders where the files should be, and back up nothing of substance. If you back up an iCloud Drive folder, either turn that setting off or check that your backup contains real bytes.
The same applies to Desktop and Documents when you let iCloud manage them, because those folders are then iCloud Drive folders.
The storage in your iCloud plan is real, it is off-site by definition, and you are paying for it whether or not you use it. The right way to use it for backups is to have a backup tool write into a folder there, rather than to treat the sync itself as the backup.
By hand, that means an encrypted archive with a recorded hash:
tar -cJf - ~/Documents | openssl enc -aes-256-cbc -pbkdf2 -out ~/Library/Mobile\ Documents/com~apple~CloudDocs/documents.tar.xz.enc
shasum -a 256 ~/Library/Mobile\ Documents/com~apple~CloudDocs/documents.tar.xz.enc > ~/documents.sha256
That gives you one encrypted copy with no versions, which is better than nothing and worse than a real backup. Time Machine cannot help here at all: it needs a disk it can format or a supported network share, and a cloud folder is neither.
Copy Shelter writes to any folder your Mac can write to, which includes iCloud Drive, Dropbox, Proton Drive and Google Drive. Everything is encrypted before it leaves the Mac, so the provider stores bytes it cannot read, and the backup keeps versions and is read back and checked on a schedule.
Different feature, different devices. iCloud Backup covers iPhone and iPad, and it is genuinely a backup: it captures the whole device and restores it. There is no Mac equivalent. On a Mac, iCloud gives you sync, not backup, and Apple's own answer for Mac backups is Time Machine.
Yes, they are on Apple's servers and on your other devices. That is real protection against hardware failure. It is not protection against deletion, overwriting or corruption, which is what most data loss actually is.
Within 30 days, yes. iCloud.com, Data Recovery, Restore Files. After that it is gone. Some apps also keep their own version history inside iCloud, which is separate and usually longer.
If a backup tool reads those folders, yes, or at least verify that your backup contains real files and no placeholders. If your Mac genuinely does not have room, leave it on and back up from a machine that keeps full copies.
No, in the way that matters. They all sync, they all propagate deletions, and they all keep a limited version history, which is a convenience. The same approach applies: write a real backup into a folder inside them. Provider by provider: Dropbox, Google Drive and Proton Drive.
If it is encrypted before it leaves your Mac, yes: the provider stores bytes it cannot read. That is how Copy Shelter writes, and there is no setting to turn it off. If you are rolling your own, encrypt first and keep the key somewhere other than the Mac being backed up.
Related: the 3-2-1 backup rule and backing up a Mac to an external drive.