Let's say you have an important file on your desktop computer. You buy a laptop, and you want the file to also be available on that one. You could copy the file over, but then any edits you made to the file on one computer would not be reflected on the other. You'd need to remember to manually copy the file from one computer to the other whenever you made edits.
This is where a cloud / sync service such as iCloud comes into the picture. While that file of yours is stored in the cloud service, it's accessible from both computers and any edits you make to it on one computer become available on the other as soon as the file is synced over.
But due to this synced nature of files stored on cloud services, they aren't really backed up. Your file might appear on multiple computers, but delete it on one and it's deleted on all. Let's say the cloud provider suffers a catastrophic hardware failure and even their own backups are affected - your file is gone.
This is where backups come into play. You always want to have multiple copies of your important files, stored in different locations. If you have just one copy in one location, or multiple copies in the same location, your file is not backed up. You might have heard the 3-2-1 backup mantra:
Always have 3 copies of your files, on 2 different medias, at least 1 of which is off-site.
An online backup service is just one possible media for backup copies of your files - the off-site one. External harddrives, thumb drives and network storage are other, usually local, media options. One benefit of an online backup is that it's not located at your home or business. If your home / business burns down, is flooded or someone breaks in, an online backup is still safe. Another benefit is that online backup can be automated and effortless, especially for laptops.
The downside of an online backup is that backing up files is dependant on your internet connection speed, availability and any data caps that might be in effect. Additionally restoring files requires you to have an internet-capable device, which might not be the case if you're trying to troubleshoot problems. And, of course, all of this costs money. Depending on the service you might need to pay a monthly or annual subscription fee, and / or pay per amount of data uploaded / downloaded. Even if you never, ever end up needing to restore files from the online backup.
At the same time, you should also have a local backup of your files - usually on an external harddrive that you plug into your computer for example once a week to keep the backup up to date. A second backup on a different drive that you update less often, say once a month, creates redundancy and might help against ransomware such as CryptoLocker. Alternatively if you have network storage (such as a NAS) available for backups - or an external harddrive always connected to your desktop - you can automate backups to it much like an online backup.
