Why is my remaining storage so low?

I have an M1 Mac mini with storage capacity of 245 GB. Until recently, after taking into account the storage of apps and documents I was left with about 70 GB which is a comfortable margin for my usual activities. However, on checking this morning I find that I only had about 40 GB left. One item which surprised me was iCloud drive using 29.9 gb of storage. The reason I bought another 200gb of cloud storage was to relieve the pressure on my Mac Mini's HD storage. All my documents are stored in iCloud Drive with some of them also downloaded on to my computer or transferred to my 1tb external drive. You will see that the documents I download on my computer only use 9 GB of HD storage. If you look at my iCloud account you will see that that also shows I'm storing 29.9 gb of Documents on my iCloud storage plan. So by uploading all my documents on iCloud Drive I don't relieve any pressure on my Mac Mini's storage. Is this correct? If so what's the point in paying for more storage in iCloud if all the documents in iCloud Drive are also taking up space on my Mac mini? I'd be grateful if someone could explain to me the theory and practice of using iCloud and iCloud Drive.