When it was released, Windows 8 integrated cloud services were unmatched by any prior Windows version. Chief among its improvements was the Microsoft Account integration: sign in to Windows with your Microsoft Account credentials, and your settings will roam from machine to machine. Behind the scenes, this syncing all used SkyDrive.

Windows 8 also included a Metro SkyDrive app for browsing SkyDrive storage. This plumbed into the Metro APIs, enabling Metro apps to save and load files directly from SkyDrive. However, it left the desktop behind. The file-syncing desktop app had to be installed separately.

With the desktop app installed in Windows 8 (and below), SkyDrive offers the same kind of syncing and cloud storage that Dropbox and other services provide. Microsoft is more generous with the amount of free storage you get (7GB for SkyDrive, to 2GB for Dropbox, though Dropbox users can earn up to 18GB with referrals and other bonuses), but the experience is broadly similar regardless of which service you use.

This means that SkyDrive in Windows 8 suffers the same annoyance as these other services: what do you do when you don't want to sync all your files to a machine? There's a selective sync option, of course, but if you then want to use a file that's not in the synced set, you have to stop what you're doing and switch to the Web front-end to download them.

SkyDrive in 8.1 changes this up.

First of all, SkyDrive is a lot more prominent now, as it's exposed on the desktop by default. Explorer shows a SkyDrive folder. Libraries, the aggregated storage locations first introduced in Windows 7, aggregate SkyDrive storage by default. The Documents library even uses the SkyDrive location as its default write location, so any file saved to the Documents library will automatically go on SkyDrive.

On the Metro side, SkyDrive is now integrated into the settings app. From here you can configure most of SkyDrive's behavior, including which settings are synced, which quality photos are uploaded, and whether to upload on connections that are billed per byte. The Settings app also lets you buy more storage.

What is missing, both in the desktop and the Settings app, is control over selective sync. But that's because of SkyDrive's new feature, which is magical.

SkyDrive now shows all your files as if they had been synced locally. They just look like normal files. They have thumbnails, filenames, all the usual metadata. What they don't do is take up space on disk.

As soon as an app opens a file (and this applies to both Metro apps and desktop apps), SkyDrive pulls it from the server. Modifications are then synced back normally. The same occurs if a file is copied or moved; it gets automatically retrieved.

Instead of the normal selective sync options, folders can be right clicked (in both the Metro app and Explorer) and set as available offline, forcing files to be downloaded, or online only, removing local copies and doing on-demand downloads.

Behind the scenes, the first time a PC syncs with SkyDrive, it pulls down all the basic metadata: the tree structure, filenames, and so on. Then, it pulls down special metadata, such as thumbnails and full text. In many ways, this makes the files act like normal files. They can be found in searches; they have the right icons in Explorer.

The files themselves use the reparse point mechanism first introduced in Windows 2000. During that first sync, stub files ("reparse points") are created to mimic the directory structure stored on SkyDrive. Any operation on these files is intercepted automatically, allowing SkyDrive to download the file on-demand.

The use of this (rather low-level) mechanism makes SkyDrive in Windows 8.1 very transparent. Virtually any application should work correctly, with only a download delay disclosing that a file isn't stored locally. Even the command-line can work with SkyDrive files. The system should even work correctly with backup applications. Backup software should understand reparse points and treat them specially, so backing up your SkyDrive folder shouldn't cause the entire thing to be downloaded.

As a result, you can have tens or hundreds of gigabytes of files stored on a server, while still retaining pseudo-instant access. There's no long sync process.

The system still has a few areas where I think it could be improved. It would be nice to be able to set some kind of overall limit on how much disk space SkyDrive can use; on a small tablet (say, 32 or even 64 GB), I'd like to be able to say, "You can use up to 4 GB for offline storage" and have the software automatically remove local copies of files that I haven't used for a while.

There's also an odd asymmetry with SkyDrive Pro, the similar cloud storage feature that's part of Office 365. SkyDrive Pro shares a name, but appears to share none of the functionality. The magic, transparent access of online files is only found in the regular SkyDrive brand.

In Windows 8.1, SkyDrive becomes an elegant, easy to use cloud storage solution. The free storage alone makes it compelling; the deep integration into the operating system makes it better than its competitors.