I have a cloud mailbox that is placed on Hold.
Archive is not enabled for the cloud mailbox on hold.
1) What happens when the recoverable items folder for the primary mailbox reaches its quota of 100GB?
2) Who gets notified when the storage is used up?
3) What is the implication on the users mailbox?
1) Same as when it reaches the quota for "non-hold" mailboxes, you cannot delete items, you get a warning and you might even get issues with mail flow.
2) No one, you have to monitor it yourself. Unless you want to get surprised by an NDR or warning in PowerShell
3) As above.
Here are some articles with more details, including how to clean it up: