Earlier quoted context omitted.
Except for the "oops, due to an unexpected bug in our code, every image, document, and message on your device was being continuously scanned" mea culpa we will see a few months after this goes live. Only images that match the hashes of the database of CSAM held by the National Center for Missing and Exploited Children (NCMEC) that are uploaded to iCloud Photos are checked. Based on their technical documents, it's not…
>>> Only images that match the hashes of the database of CSAM held by the National Center for Missing and Exploited Children (NCMEC) that are uploaded to iCloud Photos are checked. Incorrect. All files on the phone will be checked against a hash database before being uploaded to iCloud. Any time before, which means all the time, if you have iCloud enabled.
A cryptographic safety voucher is created for each photo as they're uploaded. The iPhone doesn't know wether or not anything matched. Nothing happens unless the user reaches a threshold of 30 CSAM images that have been uploaded to iCloud Photos.