Cloud means the file is on your iCloud drive. That means, you will not be able to use that file if you have no Internet connection. So, yes, if you want the file to be available 'offline', Download it to your computer. Still, such files will be both on your drive and iCloud, and in sync.
As I mentioned, you cannot 'unsync' individual files, only the "Desktop & Documents sync" feature altogether as per instructions above. Choose what suits you more.