Your expression means Cloudflare will perform the action (Managed Challenge) for any request that is not coming from one of the listed countries, and is not a Known Bot.
Googlebot and other search engines will not be challenged even if they send requests from countries not in your list.
Since search engines make use of global networks (the cloud) and you can never know where they will crawl your website from, this exclusion is necessary to avoid search engines from being challenged (blocked).
The countries you block is up to you. Just keep in mind that Known Bots list does not include many social networks (Twitter, Facebook etc.) and blocking them may impact your visitors experience and your site SEO…