A cloud target is a deployment endpoint that doesn't run a Jaws Deploy Agent because there's no OS to install one on. The most common case is an Azure Web App. The platform talks to the cloud provider's management API directly and ships packages through their deployment mechanism.
// Machine targets
When you need an agent
Windows services, IIS sites, custom binaries, anything that has to run inside the host. The agent is the bridge.
// Cloud targets
When you don't
Managed services where the cloud provider runs the host. Less control over the runtime, less to operate, fewer moving parts.
What's supported
The primary supported cloud target type is Azure Web App (App Service). Registration is through an Azure connection - a service principal in your Azure tenant scoped to the resource groups you deploy into. From there, Azure Web Apps become first-class targets that environments and tags can reference.
Trade-offs
Cloud targets cost some flexibility. You can't drop a PowerShell step on a cloud target the same way you can on a machine - the runtime is the cloud provider's. Most teams handle this by keeping the cloud target's deployment process small (push the package, run any deployment slots dance) and putting cross-cutting logic in a separate machine-based step that calls the cloud target as an external system.