Local Backup will be created on your Device Internal Memory/SD Card. hike Cloud as the name suggests would be uploaded on hike Cloud. You are entitled to hike Cloud services if you choose to save the backup on cloud.
Local backup is taken at 3 AM daily. If the app is not launched at 3 AM, backup is taken at next app launch (foreground or background). hike Cloud backup is taken post the local backup that day, according to the user settings.