That's what I thought, too.
But it seems like a lot of people around here are saying that it puts a second copy of the files you select on your SP4 and also a copy in the cloud to use as you said.
Here is exactly how it works:
You have file ABC.doc in your Documents folder on your SP4. OneDrive doesn't touch this.
Now, you want this file backed up in the cloud so you go to OneDrive on your web browser and upload the file there into a folder called "Docs". Now you have a copy on both your SP4 in your Documents folder as well as in your OneDrive online storage in the folder Docs.
You have selected that your OneDrive folder Docs will be synced to your SP4. It will now download everything in that online Docs folder to a new local OneDrive folder called Docs. Now you have 3 copies of the file, one local in your Documents folder, one online in your OneDrive Docs folder, and a new local copy in your local OneDrive Docs folder which is a copy of your online Docs folder.
If you want to avoid having duplicate files on your SP4, you need to either exclusively use your local synchronized OneDrive folders for saving these files OR you stop automatically syncing these folders on your SP4 and only manually upload them through the website.