Overview:

There are three main OneDrive file statuses visible in File Explorer: Online-only files (blue cloud icon) are stored online and don't use local storage, but require the internet to access.

Files marked "Available on this device" (a circle with a check mark) are downloaded and accessible offline; you can revert them to online-only by selecting "Free up space."

"Always keep on this device" files (green-filled circle with a check mark) are permanently stored locally for offline access and also use device storage. You can switch these back to online-only as needed.

You can find detailed information about the different file statuses in the OneDrive Sync Client at the documentation link below.