Google has documented details of the Android Backup Service and of the Data Backup Framework on its Android Developers website. The descriptions are targeted to developers writing applications but are still helpful:
Android's backup service allows you to copy your persistent application data to remote "cloud" storage, in order to provide a restore point for the application data and settings. If a user performs a factory reset or converts to a new Android-powered device, the system automatically restores your backup data when the application is re-installed. This way, your users don't need to reproduce their previous data or application settings. This process is completely transparent to the user and does not affect the functionality or user experience in your application.
They also specifically address user privacy:
In addition, users can disable data backup functionality through the Android system's privacy settings. When a user disables backup, Android Backup Service deletes all saved backup data. A user can re-enable backup on the device, but Android Backup Service will not restore any previously deleted data.
TL/DR: If the Notes app is configured to use the Android Backup Service and has defined your notes as data to include in the backup, then yes, your data is being stored on a Google server. Toggling
Backup my data will delete currently saved personal information from Google's servers that is associated with your Google account. This will affect all of your current apps' backed up data.