OneDrive is integrated into Windows 8 and if you open an Explorer window you will see it in the drive/folder panel on the left. Select OneDrive and a list of the folders and files it contains is displayed. Files can be opened, copied and deleted, but where are they? Are they on the disk drive or on the internet?
Although OneDrive can be accessed using Explorer like any other folder on the disk drive, and there is a OneDrive folder in the C:\Users\YourName folder, it doesn't work like you think it does. It looks like it keeps all your files on the disk drive and then keeps them in sync with the online storage, but it doesn't always do this and it depends on the configuration settings.
With OneDrive a file can be online or on the disk drive. If you don't have an internet connection for some reason, such as when you are out with a laptop, you may be surprised to find that you cannot access some of the OneDrive files, even though they appear to be on the disk drive.
In its default setup, a file on OneDrive is only stored on the disk drive if it is opened. So if you have a Word file on OneDrive and then open it in Word on the PC, it will be downloaded to the OneDrive folder on the disk drive and opened from there. You then have a local copy. OneDrive tries to intelligently manage the location of files on the disk and online.
This means that at any time, the OneDrive folder on the disk drive contains some files that are on the disk and others that are online, depending on whether they have been opened or not. When you don't have an internet connection the online ones are unavailable, but how can you tell? Select the OneDrive folder, go to the View menu and select Details view. The Availability column shows whether a file is online or offline (scroll the window or make it bigger if you can't see the Availability column.
(SkyDrive has been renamed OneDrive since this screen shot was taken)
Disk space is plentiful these days and even budget PCs have 500GB or more. Most people only have a few gigabytes of files on OneDrive, so there is plenty of space to keep a copy of them on the disk drive.
Open an Explorer window and right click OneDrive on the left. Select Make available offline. This copies all the files online to the OneDrive folder on the PC. (Warning, this could take a long time if you have many gigabytes of online files because they will all be downloaded.) They will then be available at all times from the disk drive even if you don't have an internet connection. Any changes to files, additions or deletions are mirrored with the online version whenever there is an internet connection.
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On the other hand, if the PC's disk drive is small and you want to save space, right click the OneDrive folder in an Explorer window and select Make available online-only. It will free up disk space, but remember that the files won't be available if you don't have an internet connection. Choose between offline convenience or extra disk space.