What is the purpose of (and criteria for inclusion in) the "Downloaded" section of the iTunes Library?
So, as far as I can tell the "Downloaded" section of the iTunes Library is just all music stored on the local machine (i.e., which can be played without needing to stream from the ITMS / iCloud / Apple Music).

The name makes sense if you originally obtained all your music by downloading it, but for the rest of us "Offline" would be a better name for this section.