A Microsoft account is needed to use Microsoft's online products. For example, to use OneDrive, XBox, Microsoft Store, Outlook Online, Microsoft 365 Online and Microsoft Community, you need to have a Microsoft account.
A Microsoft account is always free for everyone, and it comes with 5GB of storage space in OneDrive.
The free version of Microsoft 365 is the online-only version, known as Microsoft 365 Online. It is free for everyone. You can find it here: https://www.microsoft.com/en-us/microsoft-365/free-office-online-for-the-web The free version of Microsoft 365 stores your documents, spreadsheets, presentations, etc. in your OneDrive
The subscription version of Microsoft 365 is the downloadable version, which allows you to download the Microsoft 365 apps to your devices. The subscription version of Microsoft 365 comes with 1 terabyte of storage space in OneDrive, and lets you store your documents, presentations, spreadsheets, etc. on your hard drive, if you wish, or on your OneDrive.
In addition, if you have a subscription to Microsoft 365 and you are using Microsoft 365 Online, you will find that you have more features to work with.