Referenced files have a special overlaid badge (highlighted in red). With the box unchecked, import images, and those that are added will get an extra badge overlaid that indicates the media file is referenced and not part of the Photos library. With iCloud Photos enabled, some smaller text makes sure you’re clear that items imported with this unchecked won’t be uploaded to iCloud Photos and, if you uncheck it, you also see a dialog box with the same message that you have to click OK to dismiss. In Photos > Preferences > General, you can check or uncheck the box next to Importing: Copy Items to the Photos Library.
