A Microsoft file hosting and synchronization service.
If you want to back up everything across multiple devices, think of OneDrive as your main file repository to reduce the chance of mistakes.
In my opinion, the answer to number 2 is NO; you will probably get duplicates, since you can't "sync" new file versions with much older file versions. However, you can always "back up" files with the same name by putting them in uniquely named folders.
Answer to number 1: If you don't intend to use OneDrive, and with folder backup OFF, your new files will go to the default location going forward. The new path names would bypass the OneDrive folder, such as:
C:\Users\username\Documents instead of C:\Users\username\OneDrive\Documents.