IOS – Why iOS settings and iTunes report the storage usage differently

Several days after I posted this question my phone started having problems (apps opening slowly and crashing) and I erased the phone and attempted to restore from the iCloud backup. The restore screen gave me a time estimate of 11 hours for a process that (for most people) takes about 10 minutes. It ran for about an hour and then failed with an error message that the wifi connection had failed (it hadn't).

After numerous unsuccessful attempts and several days of escalating phone support from Apple, a senior tech told me that my backup was "corrupted" and forwarded the request on to an engineer to see if my data could be retrieved.

So I believe the correct answer here is that this was not normal and was a sign that the phone contained some sort of corrupted data, which was being passed on to iCloud every time I backed up.

Finally found it :)

Under home directory Library has all the data and most of them came from mail app which includes downloaded imap copies and attachments. I erased them by using mail app and everything is fine for now.