Apple has now posted a video to help explain what iTunes Match is and does. The explanation provided is as follows:
iTunes determines which songs in your collection are available in the iTunes Store. Any music with a match is automatically added to iCloud for you to listen to anytime, on any device. Since there are more than 20 million songs in the iTunes Store, chances are your music is already in iCloud. And for the few songs that aren’t, iTunes uploads what it can’t match (which is much faster than uploading your entire music library).
Even better, all the music iTunes matches plays back from iCloud at 256-Kbps AAC DRM-free quality — even if your original copy was of lower quality. Once your music is in iCloud, you can stream it to any of your devices. Just browse the complete list of all your music stored in the cloud.
To listen to a song, tap the iCloud icon next to it and your song starts playing. You can store up to 25,000 songs in iCloud (more if songs are purchased from the iTunes Store), but only what you want to play is stored on your device. So you have immediate access to a huge music library without taking up storage space.
You subscribe to the service for $24.99 a year. This will allow you to keep not only songs you have purchased from iTunes but also to store songs you have imported from your CDs.
If you want to be able to access your music anywhere without having to manually sync the music between devices, this service may be for you.