A Microsoft file hosting and synchronization service.
I'm also having the same problem. My whole OneDrive of 117Gb (minus one excel spreadsheet) is "files on demand" enabled. Going on About this Mac>Storage shows my 128Gb is nearly full, in fact it says I have 145Gb of files which is interesting. The recommendation list of what to delete to free up space lists a lot of the content of my OneDrive, however when I go on file browser my OneDrive folder is no where near this 117Gb.
I am running the latest version of Catalina. A fix for this would be brilliant, or even a response from Microsoft.