Updated: July 19, 2013; November 9, 2013
By now, if you have read my Windows 8.1 Preview, which you should, you will have learned that during the initial installation and setup of your user name, you are not given a choice to create a local account. You must use an online one. At the very least, this is what happened to me, and I presume, will happen to you.
While this may yet change in the final build of the operating system, at the moment, based on my testing, the lack of the local account setup is a serious insult to my intelligence and the ability to choose. If you have similar concerns, then you might want to read this tutorial carefully, because it teaches you how to create a local account that is not associated with any online storage.
How to setup the local account - step by step
During the installation, you will have to create a Microsoft account. Do it, but give it some silly name or something, because we will not be using it later on. We just need it to create our local user once we hit the desktop for the first time.
When you log into the system, open Control Panel - User Accounts and Family Safety - User Accounts - Manage Accounts. In the bottom, click on Add a new user in PC settings.
You will be ask how this person will sign in. In the bottom, you have Sign in without a Microsoft account (not recommended). This is what you want, click there.
In the next screen, the wizard will give you options and explain the benefits of using each options, Microsoft versus local. What they fail to elaborate on is, what happens with your data in the cloud, if some government agency decides to take a look, if the cloud storage goes down, or if you have no Internet connectivity. Luckily, we know better than this pseudo-modernistic bullshit.
After this step is complete, you will want to change the account type. By default, the new user will be created as a standard user, so it will be limited in what it can do. You want to change its type to Administrator. But in the wizard above, the Modern UI one, you will get an error. Worry not, we will change the account type using the classic interface of the Control Panel, in the desktop mode.
And basically you're done. Log out of the current, online account. Log in with your local account. Go into the User Account settings and DELETE the online one. Problem solved. You now have your own local account and no one can bother you with bullshit.
For more excellent advice on how to handle issues in Windows 8 family:
Windows 8 new activation & BIOS explained
Windows 8 safe mode explained
Windows 8 classic shell
Windows 8 recovery options
Windows BLUE & desktop death discussion
This is a fairly short, straightforward tutorial with a few snags and twists. In general, Microsoft did not limit your options, but they did alter the presentation layer to force more of the less knowing users to choose the online options, so they can exercise a greater control over their product and possibly steer you toward revenue. Truth to be told, this is not different in any way from what Google does on Android, and in fact, there, it's even worse, because you cannot use a local account. However, for long-time Microsoft users, this new change is irritating and pointless.
Well, at least you learned something new. You can choose not to be part of the stupidity herd and use a local account, taking care of your data the way you see fit. You can decide when and how your data will be available, and not some arbitrary Internet connection glitch or whatnot somewhere. Anyhow, we have a solution. That would be all.
Update, November 2013
You may have heard a lot of rumors. Do not plug in your computer, and you may be able to continue with a local account. Disconnect the user after the installation. When installing the latest service pack, you need online credentials for the Store, etc. All of these shall be answered. Soon enough, I will try to perform an upgrade on my Asus ultrabook, to see what gives. This will give you the best indication how the local vs. online really works. Stay tuned for updates.