USB to host means that your piano accepts a host (like a computer) on the other end of the connection. So your described behavior is entirely expected. Plug in headphones or other speakers on your piano to improve the sound, and don't forget to make sure you're not hearing both the internal sound of your piano AND Pianoteq (depends on how your keyboard manages this).

USB to device means that your device can act as a host to hook up other devices to (e.g. USB sticks or other, usually "class compliant" midi controllers/keyboards). Many modern workstations have this capability, your piano does not.

Thanks to you both. I understand now. I find I have to make sure the 725 is switched off before I open Pianoteq, otherwise it chooses the piano for its output on preference to my UR22. This has only happened since I upgraded to Standard and Pianoteq 8: only a matter of remembering.

When I do play Pianoteq and the internal sound simultaneously I can just tell that the internal sound plays a fraction of a second before the PTQ note. Hardly noticeable but it's there. My PTQ is running at 4.4ms so presumably there's a bit more latency somewhere else in the system. Interestingly, before this issue cropped up I was conscious that playing the 725 with its own audio was a more "immediate" experience than with PTQ - a feeling of being in more direct contact with the instrument. It seems even a very small latency can be felt, even if it is too small to be heard.

USB to device means that your device can act as a host to hook up other devices to (e.g. USB sticks or other, usually "class compliant" midi controllers/keyboards). Many modern workstations have this capability, your piano does not.

My Yamaha CLP-725 has USB to host but not USB to device.  I know this because Mr Yamaha tells me so. I have recently discovered that PTQ and my computer recognise the 725 as an "Output Device" and will play PTQ recordings and other audio through the 725's on board speakers via the USB to host socket. The sound is not good, because of the poor quality of the 725's speakers/amplifier, but I am surprised to hear it at all. Anyone know what's going on?

Per page 28 of the manual, the USB MIDI port doubles as a digital audio interface for both input and ouput:

"You can play back audio data on a smart device or a computer with this
instrument. You can also record your keyboard performance as audio data to a
music production app on a smart device or a computer."