That couldn't do OCR at all, right? It had no camera. It could do handwriting recognition on stylus input (where it has full perfect stroke data, not just pixelated images of strokes), which is a very different and easier problem.
The Apple Newton was capable of online OCR (doesn't have to do with internet connectivity in this case).
As you mention, online OCR is when you input the strokes directly on the device vs offline OCR where the input is an image.
Some trivia:
The first version of handwriting recognition engine of the Newton was developed by ParaGraph International (founded by the founder of Evernote).
Another version (Print Recognizer) was later developed by Apple.
