Hello and welcome to Apple Support Communities, mumbles2701!
I understand you want to know if having 1 TB of data on your iCloud Drive would sync the entire data to both your laptop or PC, even if they don't physically have that amount of storage available. I'd be happy to provide information about this.
Have a look at this article: Add your Desktop and Documents files to iCloud Drive
The files that you keep in iCloud Drive use your iCloud storage. And as long as you have enough space in iCloud and on your device, you can store as many files as you like.
If you need more space on your device, iCloud Drive can help. On your Mac, go to Apple menu 
> System Preferences > iCloud. Next to iCloud Drive, click Options and turn on Optimize Mac Storage. Then your Mac keeps all of your recent files on your computer, but keeps your older ones only in iCloud, ready for you to download when you need them again. If you want to free up more space on your Mac, follow these steps. On your iPhone, iPad, or iPod touch, you can search and browse files from all of your devices and download them only as you need them.
You can also free up space on your device and in iCloud Drive when you delete files. Then go to your Recently Deleted folder in the Files app or on iCloud.com and delete the files there. Before you delete anything, make sure that you back up the files that you still want. When you use iCloud Drive and delete a file on one device, it deletes on your other devices too. iCloud removes the files from every device that you're signed in to with the same Apple ID.
Here, just like with the optimized versions of photos, you would be able to download the files as needed. Therefore, the entire 1 TB library of files would not be downloaded.
I hope this information is useful to you.
Thank you for using Apple Support Communities.
Have a great day!
