I'm assuming here that the catch is that iTunes Match will be the only way to activate iTunes over iCloud. Without iTunes Match iCloud won't let you sync your music via the cloud, so you have to do it manually; not a big deal sure, but it's the hook they're hoping to keep you paying with.
So the point is that you pay the yearly fee (even just for a year), and instead of uploading all your songs to iCloud, they try to match as many of them to existing copies that they have. When you sync another device it'll just pull the iTunes copies of the music detected on your other machines. Presumably you'll also be able to sync your source machine as well so any poor copies of the music can be replaced with the iTunes copies, though I'm curious to know what it'll do with tracks you have that are already "better" (since it can be subjective, and higher bit-rate might not mean a better copy), maybe it'll give you the option to replace it as you like?
Only songs that aren't found on iTunes will be uploaded to iCloud as a result.
This can be seen in several ways; they're giving a way to minimise the amount of stuff you have to upload to iCloud, making for faster syncing and less space used-up on your iCloud account and you're getting (probably) better copies of music that you've ripped from CD's or… elsewhere.
All in all it seems like win-win to me. I don't actually have any devices to sync with, but I'll happily buy a year's worth just to update poor copies of music that I have that I imported ages ago, or bought back in the iTunes music store's infancy.
I hope though that it will allow streaming for songs that either aren't synced yet, or that you simply can't fit, as my computer has way more music than even a high-end iPad could hold, so what would happen then? I'd hope I could set aside 10gb for music on my iPad, and iTunes would only locally store the ones I listen to most, and stream any others that don't fit, or something like that anyway.