How does endpoint communication work with SEPM on-prem tied to cloud

I am trying to find documentation on how the communication piece of this works. It says in the admin guide that "location" is no longer used once SEPM is tied to SEPM Cloud. So how does the communcation work? Does the system attempt to connect to SEPM on-prem and if it cant it then checks in with the cloud instance? Is the "cloud instance" only a connection point for SEPM on-prem server or do the endpoints have some other way to communicate with it?

If you have links or documentation on this it would be much appreciated. I am hoping that cloud is like an off-prem management server for mobile systems, like laptops, to check in with for management purposes.