It looks like you’ve filled the selection with your current foreground color. Don’t know how that happened, but the keyboard shortcut for that is Alt+Delete.
First make sure you have an active selection (“marching ants”). Next,
- pressing Delete on a floating layer will “punch out” the selected area, so that the underlying layer shows.
- pressing Delete on a Background layer will bring up the Fill dialog with options, because a Background layer cannot contain transparency.
However, the above is a destructive, one-time-only operation. It’s generally much better to work with masks, where you can go back and tweak/improve the mask at any time later. The result is exactly the same, just with much more flexibility.