So if you access one of your songs from the iCloud from say, your new iPhone, it sounds like it'll reside on there permanently. But will it actually be taking up space?
Well, anything that would reside on any device "permanently" would take up space. These demonstrations show that you can either "stream" music or actually download it.
It appears that music "streamed" from iCloud will be cached temporarily so it would take up some space temporarily. (Movies rented on the Apple TV2 already use this concept.) Per the Airplane Mode demo it may or may not be there later. If it is downloaded it would be added to the iTunes library on the device...but could be deleted at any time to free up space and it would still be available later to either stream or download.
There was quite a bit of discussion by developers a while back when they found coding in iOS 5 that was capable of caching a very small amount of a file...ostensibly the beginning of a song. The theory was that a snippet of most or all of the songs in someone's iCloud iTunes library could be saved on all of the owner's devices so that when they accessed that song it would begin playing immediately and the balance would be downloaded while that portion was playing.
As mentioned in the article, if you think about it, this is the best of both worlds. A song that is "streamed" is available almost instantly while the rest is downloaded (which is a very fast process via WiFi and almost as fast on 3G) and then kept in cache until more space is needed for other music. It would seem Apple is once again ahead of the curve in knowing what we want before we even know what we want!
