Yes, it does use the so called "cloud", which is just a somewhat confusing name for personal stuff being stored on various third party servers who lease out space to domain owners. The obvious idea is that you either don't have a hard drive for personal storage, or if you do, space on it is saved, because your documents are stored elsewhere.
It's OK for unimportant material, but there's no way I'd trust it with anything important. Quite apart from information being compromised by hostile elements, there's always the possibility that something will go badly wrong and whatever you have there will be lost.