Can ‘Hollow Files’ Be Considered an Alias To the Optimized iCloud File?

MBPro -2010 -High Sierra latest upgrades-1TB HD with iCloud 200GB and optimization for Desktop and Documents folder ON, had to reformat due to software malfunction (unfixable Genius Bar tried).
AFTERWARDS cloud stored files (using same AppleID) appear on MBPro. 1. Are these actually back on the 1TB drive using space (and still on cloud server as well) 2. The little cloud icon next to these files is either there (with the down arrow) or no icon at all. Clicking on a file without the icon will open it – I assume that it stays stored in Cloud and downloads to the 1TB drive?
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Karen Frazer