I seem to remember the "backing up your library" to the "cloud" was tried by someone before. They had software that scanned the CD in your drive and then either ripped it to their servers, or just unlocked access to that album in your account. RIAA brought them down. This seems a little different, and highly wasteful of space. If 500 people upload a copy of "whatever," Amazon has to store 500x the space of "whatever," rather then just unlocking one copy for 500x people. Keep in mind 1 meg of cloud space is easily over 10 megs of physical storage. (RAID, redundancy, geographical peers, backups, etc...)
Amazon... not sure what to make them. They seem to be doing things which obviously will get them sued. I guess they figure if any ONE takes off they will make bank. Either way, I'm excited about this because Apple is great at being the best. The better the competition, the better the Apple product.