I logged onto my main desktop the other day and all of the desktop icons were a lot smaller than usual:
Back in the early days of SkyDrive you could have files stored online which didn’t take up space on the hard disk; unfortunately, this feature was removed and any files in synced folders would take up space on the disk.
From some research (Windows Insider anouncement) it appears that as of the Windows 10 Creators Update files on demand is back. You can tell at a glance if files are available locally or only when you’re online by looking at the status column:
The cloud icon is used when files are available only when online and the green mark when the files are always available; the latter means that the file is on the hard disk.
Any file which is cloud only, will become available when it is opened as it is downloaded; any files created on the device will remain available.