The toggle is off which means it’s not currently getting backed up
If the question is why would it take ~900MB if you turned it back on, I’d assume that it’s not marking offlined files as purgeable, which would exclude them from backup
OTOH some might say this is the better experience with a full backup after a critical data loss – to have all the files you previously marked as offline available immediately after you’ve done a restore from an iCloud backup 🤷🏾♂️