Yes, contacts in the iCloud folders are stored in the 'cloud' and they'll sync back down when you sign in to the iCloud. You view them at anytime at iCloud.com or on your iDevices.
You don't need to back them up, but it's not a bad idea to do so, especially if you might do something stupid, like delete them from one of the devices. That will sync up and delete them from the server.
You don't need the iCloud with office 365 accounts as everything is in the cloud already. This applies to Exchange online, outlook.com, and gmail. (Although getting gmail to outlook is difficult and using the iCloud makes sense.)