how do offline files work

Hi Techies,
DO offline files in w2k work by copying files from the server to the client. Or does it check for changes to the files and append any differences in the 2 versions of the file ?
I’m asking because I have a WAN set up and the offsite users will use files up to 4 mbs(autocad files) in size and I need to find a way to centralize/standardise the location of my files