Short answer: OneDrive is sync. Files On-Demand and Known Folder Move both make it feel like a backup, and neither changes what happens when you delete something.
The space is worth using. It needs a real backup written into it. Live files pointed at it are a different thing.
OneDrive does more than a plain sync folder, and both of the extras look like backup from a distance.
Known Folder Move redirects your Desktop and Documents into OneDrive. Microsoft's own interface has described this as backing up those folders, and it is a reasonable thing to switch on. What it does is move where the folders live. There is still one copy of each file, it is still synchronized, and deleting a file still removes it everywhere.
Files On-Demand keeps placeholders on the Mac and downloads a file when you open it. Useful, and it means most of your OneDrive is not on your Mac. If that is on, the copy you thought was local is a pointer, and there is one real copy, held by Microsoft.
Neither is a criticism. They are good features that answer a different question from the one a backup answers.
Thirty days catches the mistake you notice. It does not catch the file quietly corrupted eighteen months ago, which is the case an archive exists for, because nobody notices that within a month.
Modern versions of the client mount under the same place as every other provider:
ls ~/Library/CloudStorage/
You will see a OneDrive-Personal or OneDrive-YourOrg folder. Anything
that can write to a folder can write there, which is all a backup tool needs.
OD=$(ls -d ~/Library/CloudStorage/OneDrive* | head -1)
tar -cJf - ~/Documents | openssl enc -aes-256-cbc -pbkdf2 -out "$OD/documents.tar.xz.enc"
shasum -a 256 "$OD/documents.tar.xz.enc" > "$OD/documents.sha256"
And later:
shasum -a 256 -c "$OD/documents.sha256"
With Files On-Demand switched on, be aware that reading the archive back to hash it pulls the whole thing down again. On a large archive that is slow, and on a metered connection it is expensive.
As with every third-party provider, macOS gives no supported way to ask whether a file in the OneDrive folder has finished uploading. The tick in Finder is drawn by Microsoft's own File Provider extension and no other software can read it.
So for some period after a backup is written, the second copy you believe you have is bytes on the same disk as the first. Copy Shelter counts only copies it has verified and says which state it has actually established.
A Microsoft 365 subscription usually comes with a terabyte nobody is using. That is a good off-site destination, and off-site is the copy most people do not have.
Copy Shelter writes an encrypted, versioned repository into a folder like that one. Everything is encrypted on the Mac with a key generated there and never transmitted, so your files are unreadable to Microsoft and to anybody who gets into your account. Deleting a file on the Mac does not remove it from the backup. Old versions stay until you decide otherwise. No 30 day counter discards them. And the backup is read back and checked against its hashes on a schedule, so you find out on an ordinary Tuesday. Free for one location, and no storage bill from us, because the storage is already yours.
No. It changes where your Desktop and Documents live so they are synchronized. There is still one copy of each file, and deleting one removes it from every device. It is worth switching on and it is not an archive.
About 30 days in the recycle bin on a personal account, then it empties. Business and Microsoft 365 plans differ, sometimes considerably, so check the retention on your own plan.
In transit and at rest on their servers, with keys they hold. That protects against a stolen disk in a data center. It does not stop Microsoft, or anybody who gets into your account, from reading them. Encrypting before upload is the only version that is yours.
If your OneDrive is the only place some files exist, yes, because On-Demand means those files are not on your Mac at all. If OneDrive is a destination and your only copy lives elsewhere, leave it on and let the backup be the thing that is complete.
Yes. A deduplicated and compressed backup is usually smaller than the files it protects, but it is not free, and it shares the quota with everything else in the account.
Related: Dropbox, Google Drive, Proton Drive and iCloud Drive.