There is a very handy iCloud Drive feature, called Desktop & Documents. Once enabled, it takes the Desktop & Documents folders from your Home folder….
…..and moves them into iCloud Drive.
We can get to iCloud Drive in a Finder window, it’s listed in the sidebar, like so.
We can also access iCloud Drive from the menu bar.
The contents of your iCloud Drive is stored on Apple’s servers, accessible through the internet. A copy is also stored ‘locally’ (on the computer): located inside the hidden Library folder is a Mobile Documents folder. This is where iCloud Drive data is locally stored.
It’s this local copy that allows us to work offline. Synchronisation with iCloud continues whenever an internet connection is present.
As to whether a complete copy of your data is stored here depends on your ‘Optimise Storage..‘ setting, found in System Preferences->Apple ID->iCloud.
With Optimise Mac Storage enabled, older files will be retained in iCloud Drive, but removed from your computer, in order to make more storage space available. These files will still be visible in Finder, and available ‘on-demand’, as long as an internet connection is available.
You can tell which files are present on the computer, and which have been removed to free up space, by their Status icons. A full list of iCloud Status icons can be found here.