iCloud doesn't optimise local storage

Why does iCloud store files on my disc drive? This defeats the purpose of Optimising storage, it uses more of your local drive space...which seems bonkers.

I've selected the option to move Documents and Desktop to iCloud but they did not move, still they're taking up space. The Apple support article specifically states that selecting "store in iCloud" moves those files from the local drive to the cloud. That doesn't happen and as mentioned, worse still the iCloud contents are also stored on the drive. Instead of freeing up space, it is using space.

This Apple's comment, "Your Mac can optimise storage by using iCloud to automatically make more storage space available when needed.* It's a way to allow your Mac to free up storage space for you."

Any ideas?

MacBook Pro M1, 512GB, 8GB RAM, Ventura (the same issue exists with Big Sur).

Thanks.