This is a feature that has been among the most loved aspects of its main competitor for more than a decade.
Somehow, Microsoft managed to make the same feature sound and feel and be creepy.
This has the effect that (to a first approximation) everyone knows someone with a horrific OneDrive data loss story, no-one particularly trusts OneDrive with anything actually important, and so no-one wants to be forced to use it for everything.
I understand that you run into this problem with third party software like Dropbox, because they aren't natively integrated with the OS and therefore need to do some unreliable file tagging to support basic operations like renaming, moving or copying files, but Microsoft controls the entire OS.
They can scan the filesystem journal for file system operations. They can build custom OneDrive specific features into their file explorer. They have an office suite that can directly integrate with OneDrive.
Yet they chose to not do that and instead decided that they really ought to collect all your data for training AI instead.