Well first you have to have a Microsoft account, so you're forced to provide personal information to Microsoft to create that.
If you want to earn points while browsing you have to use Edge, and be signed in to your Microsoft account while doing so. This allows Microsoft to tie your browsing habits to an actual person instead of a randomised ID.
If you want to earn points while searching then you have to use Bing, which has the same privacy pitfall as Google by collecting search queries and using those queries to aid in targeted advertising.
You can also earn points by completing "fun quizzes and polls", which could be supplied by third-parties and/or contain questions that can be used to extract information useful for privacy-averse companies/organisations to use in targeting if they were allowed access to the data.
As you may remember, Cambridge Analytica extracted personal information from a survey app they placed on Facebook which they claimed was only to be for "academic use" but was used to intentionally sway voters in worldwide elections.
You can also opt to receive "exclusive email offers", which could come from third-parties and those third-parties may be allowed access to your email address to deliver said emails.
To be clear, I've never used Microsoft Rewards and don't know how the quizzes, polls and email offers work. The poll and quiz questions could be wholly innocuous and the answers provided exclusively used by Microsoft for benevolent purposes, so the last two points are 'what if' scenarios rather based on any actual experience.
