Difference between notes under "iCloud" and "My iPhone" tab?

In my notes app I have the "tabs" or options:

iCloud, Hotmail, and On My iPhone. The notes under the iCloud tab are the same notes I have on my macbook while the notes under On My iPhone tab are the notes i had on my old iPhone.

I don't get the distinction. Clearly, both notes are in iCloud, so why have two different tabs? Are the On My iPhone supposed to not be in iCloud since a distinction is made?

Another weird thing is that my macbook is not even set to sync with iCloud but apparently does so anyway.