If I have sync paused, where are my files stored? From what I understand Lightroom only uses cloud storage, unlike Lightroom Classic which uses local storage. Yet if I have sync paused, I can still import new files and work on them. So they must also be stored locally?
Sync refers to synchronizing with Lightroom Classic. If you pause that function, and are using Lightroom Classic, then synchronization of images between Lightroom and Lightroom Classic will be paused. However, if you are just using Lightroom, the images that you import will be downloaded to your hard drive and temporarily cached while they are uploaded to the cloud. That's the way it works.