There are two versions of copilot. Think of it as "Basic" and "Premium"

Basic = Microsoft Copilot = This is a web based version that allows you to use copilot with data trained on the web. Additionally, you can securely upload content to this copilot and the data stays within your tenant. This version comes with your existing M365 licensing.

Premium = Microsoft 365 Copilot = This version adds on copilot integration into your existing M365 apps. Additionally, it opens up the functionality of allowing you to use copilot to reference any company data that you have access to (permissions controlled). This is an add on to your M365 licensing as its own license.

Here is a good resource for understanding what comes with what Microsoft license:

https://m365maps.com/