From what's in the 141 release notes, and what I've seen of it so far, it may help to think of it as major and minor releases of the realm (This is obviously very simplified from what exactly happens, and is valid for the current state of syncing)
Updating to the cloud is a major release, and modifying the local copy is a minor release. When you sync the data to the cloud, it updates the major release number.
Creating The Realms = version 0.0 - It's just a name at this point. You make changes, so the local copy is 0.1. When you sync that to the cloud, it uploads the changes you made, calling it 1.0, and updating the version on the computer. You then make more changes, and this version is marked version 1.1
You then go to your second computer, and download the realm into Realm Works - it grabs 1.0. You then make some changes there, and you have a realm marked version 1.1. However, at the moment, the sync logic is very basic - If you upload wither of the version 1.1 realms, it will get saved as version 2.0. Syncing on the other computer will grab the 2.0 version and overwrite the 1.1 version installed.
To my understanding, the next challenge (and I suspect the main feature which needs to be added before the actual release) will be to improve the sync logic so that changes can be made on either, and the updates are preserved when syncing. And I have just enough software development knowledge to appreciate how difficult that can be.