Well their wording is ambiguous, likely on purpose, so we'll see for more details.

First their site says, "To help address this, new technology in iOS and iPadOS* will allow Apple to detect known CSAM images stored in iCloud Photos."

Then later, "Before an image is stored in iCloud Photos, an on-device matching process is performed for that image against the known CSAM hashes."

An image, before being stored in iCloud Photos, is simply a local image, no?

It would make no sense for Apple to develop and release this entire system supposedly to protect kids, only for it to be, 'well if you don't want to get caught simply turn off iCloud syncing for photos.' That would literally defeat the entire purpose of this update.