Outlook Data Files

We currently use Office 365 for our email. When setting up users Data Files location, what is the difference between a local location and "Online"

For example, when I go into Account Settings and go to the Data Files tab. For some users the Location shows: C:\Users\username\AppData\Local\Microsoft\Outlook\emailaddress.ost and for other users it just shows "Online". 

Thanks for any help or explanation.