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Virtual Server: the server is an Azure virtual machine with an instance of SQL Server running on it and the files held locally. unless you run a Virtual Machine in Azure and connect it to your local network using a VPN you would not be able to use Windows Authentication. Otherwise there is little difference between this and a local server.
You would still need any relevant SQL Server licences.
There are many options for putting some or all of SQL Server on the Microsoft virtual platform - these are just three
Azure SQL: there are quite a few differences between Azure SQL and normal SQL Server. Windows Authenticated Logins cannot be used, SQL Logins have to have complex passwords, and it is not possible to query between databases.
The main advantage is that you do not need SQL Server licences, this is very much the pay-as-you-go option.
Azure Blob Storage: only the database files are stored on the cloud. As far as SQL Server is concerned there is no difference between this option and storing the files locally. Windows Authenticated logins can be linked to the database users.
You would need a local server to run the SQL instance, along with the usual licences.