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Updated Feb 24, 2022
Version 12.0
Blog Post
As from the information from Apple:
”The system manages a local copy of the items—both documents and folders—stored on your file provider’s remote storage. The local copy can contain either dataless or materialized copies of these items.”
In other words, cloud providers will have to deal with local copies that can be either “Dataless” i.e. a link pointing to the file in the cloud, as it is the case with Files-On-Demand, OR “Materialized” i.e. the file and its contents are actually stored on the local SSD, as it is the case with Pinned files and/or folders.
OneDrive has decided that upon installation or update of their new app all files will be stored as Files-On-Demand i.e. dataless
They could have just as easily decided to default to all files being Pinned and stored locally as Materialized copies, until and unless the user actively decides to unpin them. In other words, until and unless the user actively decides to switch to a Files-On-Demand model.
This is the strategy currently adopted by Dropbox and by Apple’s own iCloud Drive system, where with a single switch one can decide to either store all files locally (as well as on the cloud) OR allow the system to manage which files should be downloaded and when (i.e. Files-On-Demand)