I booked a night at a hotel on booking.com and have already paid the reservation in full which is £153. I can't make it anymore due to a family emergency. The booking.com email said that I will have to pay a cancellation fee of £153 paid if there is a no show or I cancel. Does that apply if I have already paid for the hotel? It seems strange to pay the full amount of the hotel as cancellation fees if I have already paid for it.
Most likely what you have paid is a "deposit", which in this case happens to be for the full amount of the stay.
If you were to check-in, they would deduct the deposit you've paid from the room cost, and thus you would end up not having to pay anything as you've in effect already paid for the room.
If you cancel, or if you fail to check-in, then they will do basically the same thing - they will charge you the cancel fee, deduct that from the deposit, and then either refund or charge you any difference between the two (which in this case would seemingly be nothing).
Despite the room having a cancellation fee, it's always an idea to call the hotel and see if they are willing to do something for you - perhaps move the stay to a different date that works better for you, or possibly even give a partial refund. Worst case they will say no and you've lost nothing further.