If you use a shared folder on a cloud provider such as iCloud, or if you don't have an iPhone or iPad, Dropbox, OneNote, etc., you share the folder via this service. All file management, such as when to sync or whether the actual file is on your hard drive or just a link to the file in the cloud, is handled by the cloud software you have installed on your Mac or PC. Using a service like Obsidian Sync or the remote-save plugin, you sync your vault. When you start Obsidian, it downloads all new files and chances from the cloud service and makes a local copy. So you can use remotely-save to encrypt your data in the cloud, for example, but on the local machine it's a normal file structure. Since iCloud share doesn't work for me (problems with lost files, and a Linux machine as the only working machine. I switched to remote sync and it works fine most of the time.