To me it sounds pretty simple:
Apple knows everything you've ever bought from iTunes.
Every purchase made in the past, as well as all future purchases will now be able to be accessed from anywhere. Music, Movies, TV shows, etc. Apple will not store your personal library in the cloud, they will just use the original files that are already on their servers. If you've bought that song/movie, you'll get access to it.
For those bitching about their music that wasn't bought on iTunes, Apple could care less. The whole point is to provide incentives to buy everything through iTunes...