I have a lot of music in iTunes on an external drive but I like variety--and I like to try different services. I have listened to iTunes Radio and I subscribe to iTunes Match but lately I mostly use Spotify Premium and I also like to explore new radio stations on iHeart Radio--and when I find one I like, I just stream directly from the site. I do that for Classical South Florida and for Boston's Alternative 92.9.
I have all my purchased music on my iPod Touch. However, I usually only use that when I'm at home. I do not have one single music file stored on my iPhone. I use a combination of Spotify Premium, Pandora, iTunes Radio and my music stored on iCloud to stream.
All local. I constantly curate my music collection, and it is never over 300 songs. If I don't listen to it, it goes. I know that's completely unorthodox, but I'm picky.
I have all my music stored on my computer. I have 82GB of music on my iPad Mini and I have iTunes Match turned on on my iPhone and I use iTunes Radio on everything. I have unlimited data on my iPhone and I use it as much as I want.