As part of Apple's new iCloud service is a feature called iTunes Match, which was first announced back at WWDC 2011. This feature will set Apple's cloud music service apart from competitors and has just been released in the latest iTunes 10.5 Beta 6.1 update to developers. The service should launch alongside iOS 5 and the iPhone 5 and/or 4S, both rumored for a September-October time frame.
The iTunes Match feature differentiates Apple's iCloud music service from competitors because it saves time from uploading your entire music collection and lets you stream songs not purchased from iTunes. The service scans your music collection and uploads only the songs that do not exist in Apple's music library. For the songs that can be found in Apple's music library, the service will stream directly from the Apple master copy at 256kbps to your Mac or iOS device.
However, the service is optional and will cost $25 a year. If you don't want to pay that amount, you can still manually upload the songs you did not purchase from iTunes, although this limit is set to 25,000 songs. And even better is that the 25,000 songs are in addition to your free 5GB of iCloud storage space.
Below are two videos from Insanely Great Mac that walkthrough the iCloud and iTunes Match service on both the Mac and iOS.