It blocks access to the link on your site. For example, on programming.dev people have uploaded CSAM. The links are immediately blocked (e.g. no one can get to them except an instance owner actually looking in the pictrs database) and then in the CF dashboard you get a notification with the link to the webpage it occurred on.

CSAM blocking works based on a known agreed upon, shared hash list which is created by a consortium of large tech giants. If novel CSAM is uploaded to your instance, then yes, it will fail to catch that. db0’s plugin might catch it though. LLM blocking doesn’t have the benefit of a bunch of multi billion dollar companies trying to stop it, in fact they’re doing the exact opposite, so yes LLM blocking sucks.

For your edit, I would expect you to have an email set up that you would get the notice from. You are not responsible for this kind of stuff until you have been notified, pretty much globally, so pay attention to your email.