I think it comes along for the ride with "Find my <Apple Device>" which would for most users seem to be a fairly innocuous feature. I don't think the possibility of total data loss if they lost control of their iCloud account would occur to most people.

It is an option you need to approve on the Mac the iPhone automatically backers itself up so it is a non issue unless your computer or Mac is not backed up too.

Apparently - and I don't have any way of confirming this myself - if you enable automatic backups to iCloud your iPhone refuses to automatically back itself up to your computer anymore. So all your eggs are basically in one iCloud-shaped basket.

Unless you've synced your iPhone to a Mac which gets remote wiped along with the iPhone itself. Then you've got problems.