The database snapshot is creating a snapshot of your local database so when the project is downloaded again you wont have an empty database. The database snapshot can not be used in the cloud environment. There are ways to use your cloud database locally on your computer but there arent ways to use the local database in the cloud.
Austin's answer is correct. One other note: there is no way to take a local copy of your database and put it into the cloud while using the free version of Mendix, this capability is only available when using a paid version of Mendix.