iCloud is a free cloud storage service from Apple which offers you the ability to store music on the Internet rather than on local storage such as your computer or external storage device. This online locker space (previously known as MobileMe) also enables you to store other types of data like: photos, apps, contacts, documents, etc. For digital music this type of storage has the benefit of securely and remotely storing your song library while also enabling you to sync multiple devices (up to 10) -- like the iPod, iPhone, and iPad. Incidentally, if you use the iTunes Store to purchase songs, then one of the biggest benefits of using the iCloud service is that it automatically pushes down (synchronizes) your purchases to all of your registered devices.
The basic service comes with 5GB of free storage. Certain products purchased from Apple like: songs, books, and apps don't count towards this limit -- if you store photos using the Photo Stream service, then this also doesn't impact on your allocated storage space.
One of the most talked about facilities of iCloud is iTunes Match. Rather than having to manually upload all the songs in your music library, you can pay a yearly subscription of $24.99 to take advantage of Apple's scan and match service. This searches your music library for songs already in the iTunes Store which potentially saves heaps of upload time. Found songs will then be available to you (AAC @ 256 Kbps) in your iCloud account which you can then use to sync (even wireless) to all your registered iCloud devices.
To learn the steps necessary to sign up to this service using the iTunes software, be sure to follow our guide on how to subscribe to iTunes Match.