Speculation ahead of tomorrow's WWDC announcement of iCloud is that it's a cloud-based version of iTunes.
Instead of nominating a single computers of yours as the canonical "central" store to which your iDevices are associated with, you now have an iCloud account where all of your music and videos/movies are stored. This removes the desktop computer from the system entirely. You'll be able to playback your music and video through a browser on any machine, anywhere in the world. Your iPhone and iPad will synchronise over 3G or Wi-Fi with Apple's servers, not your local iTunes account.
Obviously Apple is assuming that everyone has a fast-enough Wi-Fi connection with which to download their 16, 32, or 64GB worth of content with. If you leave a device on overnight to sync you can grab about 6 or 7GB whilst you sleep which isn't too bad all-things-considered. The platform might be ahead of its time so long as residential connections are in the sub-20mbps zone but it's the future, welcome to it. This is the post-PC world Steve Jobs was describing.
And where's Microsoft's solution to this? Until they get the backing of the major record labels (doubtful, but they'll have to capitulate unless they want to be accused of being anti-competitive by being in cahoots with Apple and Amazon) they won't be able to compete.
I'm looking forward to tomorrow's Stevenote.