@sarahjamielewis It doesn't, and I don't trust Microsoft to *not* eventually offload it into the cloud at some point into the future.
However, at least for the time being, they seem to promise that Recall is being done exclusively locally, including analyzing the periodic screenshots.
That being said... if I was using Windows still, I would turn that off *immediately* anyway. Even with their promises of only processing it locally.
@sarahjamielewis One thing of note though is that filtering out websites or Private browsing sessions will apparently only work in Edge and other flavors of Chrome, so not Firefox.