For a long time, I have had System Preferences > Apple ID > iCloud Drive > Options > Desktop & Documents Folders activated. But there has always been a noticeable lag between creating/editing a file in the Documents folder and its upload to the Documents folder on iCloud and the distinction between the two versions has been clear. Today I noticed a change in Big Sur, and it is still a bit discombobulating.
~/Documents (the user's document folder) has disappeared from Finder in Big Sur. There is a Finder > Preferences > Sidebar option to show Documents, but when activated the Documents folder shows up as an iCloud folder. Selecting that Documents folder shows at the top of the window that it is /Users/joSemikeb/Documents, as expected. But in the filepath at the bottom of the Finder window, the path is iCloud > Documents. Obviously the Documents folder is on both the local drive as well as iCloud as the files are accessible when my Mac mini is disconnected from the network. If I edit a file on my mac mini they appear almost instantly in the file on iCloud as seen on my iPhone. When I use Go To Folder ~/Documents, to get around invisible folders and flags, I end up in iCloud/Documents.
MY CONCLUSION
The user Desktop and Documents folders, and their content, physically exists on both the local drive and on iCloud
Big. Sur hides the local version of the of both folders
Big Sur directs you to
Some applications, such as Daisy Disk that work at a lower level can see the local version of these folders but those are invisible to most applications
My assumption is Time Machine backs up the local Documents and Desktop folders
The sync process between the local and iCloud versions has been streamlined and optimized to the point any lag is unnoticeable
In day to day use whether you are working on the local or iCloud drive is indistinguishable and immaterial.
If we knew what it was we were doing, it wouldn't be called research, would it?