The correct option is The extension sends the surrounding lines to the Copilot service API which returns a suggestion and code is not stored unless optional telemetry is on.

In this flow the surrounding lines near the cursor and other relevant context are sent to the Copilot service where a large language model predicts the next tokens and returns a completion to the editor. By default the service does not retain code content, and prompts and suggestions are discarded after the response is delivered. If the user enables optional telemetry then snippets and usage data can be collected to help improve Copilot in line with the chosen privacy settings.

The IDE uploads the entire project to GitHub servers where it is compiled remotely and the result becomes the suggested code is incorrect because Copilot does not upload the whole repository and it does not compile projects to produce suggestions. It relies on a limited context window around the cursor to generate text predictions.

The IDE routes the snippet to Vertex AI Codey through the Cloud Code plugin on Google Cloud and the completion is returned from Vertex AI is incorrect because Visual Studio Code with GitHub Copilot uses the GitHub Copilot service rather than routing requests through Google Cloud services or the Cloud Code plugin.

The model is downloaded to the laptop and runs fully offline so no data ever leaves the editor is incorrect because Copilot is a cloud service and it requires network connectivity to request and receive completions, and it does not provide a fully offline local model.

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