So does this sync all the machine state to the cloud? I thought they mostly used local storage.

I don't know about Os.js, specifically, but yes if you were going to implement a browser based OS for the purpose I described then local state would be relatively transient and state would be persisted on the enterprise side. There's no reason you need to use something like localStorage or indexedDb for anything, really. The only thing that buys you are performance and offline capabilities. But if security / keeping data "in the enterprise" is the priority then you can minimize what gets persisted locally.

My point was simply that no one is doing that. That isn't what these are for, and an enterprise that wants to provide a thin client desktop can't use anything that doesn't run the applications the business already uses, so they are going to be deploying an actual windows desktop hosted in the cloud using any of the many solutions available from tier 1 cloud provides or others to do that.

Back in the day we called them X Terminals. I had to work on one once and it was a pretty poor developer experience.