How is this used?
This is how the Tempo worklogs are stored and where they are actually located.
What are the differences?
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Data Center - Tempo runs inside the Jira Data Center and uses Jira tables to store Tempo data: the worklogs are stored in the same database as Jira. Worklog access is controlled through Jira settings and users can see all worklogs.
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Cloud - Tempo hosts all Tempo data in our Cloud Tempo instance, a database hosted by Tempo (AWS). It's controlled through Tempo and you can decide who sees which worklogs.
What are the benefits on Cloud?
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Tempo API is faster in terms of retrieving worklogs.
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More control over who has access to the worklogs (privacy).
How-to documentation
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Data Center: Tempo data storage on Data Center
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Cloud: Tempo data storage on Cloud