Okay, so I've been spending a lot of time with my new iPod touch.
I went ahead and signed up for the $25 annual iCloud service which finds and matches previous purchases from iTunes. In addition to that it finds existing songs in your library (say, songs you have ripped from your CD's) and adds them to the cloud.
If you have a song ripped from a CD in 128 bit, iTunes will find the match in the iTunes library and add it to your cloud account. Later, if you want to add that song to another device...say your iPod, you can download the 256 bit version and add it to your device!
If you have a song that is not in the iTunes library, they will upload it to the cloud and store it as is (i.e. if it was in 128 bit it will be copied at 128 bit).
Also you can set up an iCloud email account and associate it with your iTunes account, access the account with your iPod, PC, iPhone, etc. The iCloud account is much more than email, you can sync your contacts, calendar, etc. from multiple devices. and access them from anywhere.
The other amazing feature is the way you can sync your contacts with facebook. For example, I ran the sync between my contacts and facebook and automatically uploaded profile images from facebook to my contacts!
I ran the iMatch for iCloud on my desktop as well as my laptop and sync'd all my songs and apps. I can download them to each computer or directly to my iPod.
In short iCloud and iOS 5 are amazing! I'm just hitting the tip of the iceberg! I love it, if this keeps up I will need to buy an iPhone!