Apple’s Secret Cloud Strategy And Why Lala Is Critical

I assume this strategy works because they would be functioning as a Dropbox-like service where they just supply the hard-drive space in the cloud. Since space is pretty cheap (and Apple has a ton of cash anyways), it seems like the perfect glue that can connect all of Apple's offline products.

The way Lala currently works is that it matches songs you have in your library with their cloud library and only uploads and stores your copy if there's no match. I don't know if Apple would continue doing it that way but that's how it works now.

From what I saw at WWDC, it's also pretty good about switching bitrates based on connection speed.

Maybe someday. No wireless carrier could withstand millions of iPhones exclusively streaming content anytime soon. I think it's more likely streaming would be used only when you didn't have a local copy available. 32GB+ is probably enough storage for most people to keep the bulk of their collection local. For people with bigger collections I imagine a smarter syncing algorithm could reduce the need for streaming. Sync newly added files, don't bother syncing stuff I haven't listened to recently, sync my most played songs, etc.