I would guess that
- Synchronized data includes many things synchronized through iCloud
- iOS (17.1) is for the basic operating system installation itself,
- System data is for additional system files
When you synchronize data through iCloud, usually there are copies of data both
- On Apple's iCloud servers, where other devices synchronized to the same iCloud account can see it
- On your phone
The local copies of data on your phone are what your phone actually uses.
I don't know if this is true for every iCloud-related feature. For instance, with iCloud Photos, your phone will try to keep copies of every picture and every video. Optimize Photo Storage will give it permission to use thumbnails for some local copies, and to re-download full-size copies "on demand". With iCloud Drive it seems more likely that a lot of documents are only "in the cloud" and not on your phone until you choose to download them.
If you're using someone else's cloud, the principle that a lot of the data might also be stored locally is similar. I do not know whether the phone would list stuff synchronized with the Google cloud, the Microsoft cloud, the Adobe cloud, etc. in the Synchronized data category, but if the APIs were there to track that, it might.
