Hi ,
The answer is no, those files won’t be deleted at the moment of deselecting them. They might be purged according to retention policy settings but it will most likely keep the latest version unless removed manually from the backup storage tab in the backup agent.
Thank you

What if keep last version is unchecked. Will de-selections get removed from cloud storage once retention runs out?

No they won't. They're removed from the file list for backup and won't be addressed for retention the way the software currently is designed. I'll put in a request to add an option when removing folders that gives the user the ability to decide how it affects storage.