Mike Schramm of TUAW on the word that iCloud doesn’t stream music to iOS:
It’s too bad — I’d much rather have Pandora-like access to my music library from anywhere without having to haul all of those files around on my app-filled iPhone. And while you think that distinction might be the issue of some record company’s legal text, it’s actually an Apple decision, according to the record companies. Apple apparently wants this music to be tied to iTunes, and thus to actual files on your devices.
This explains the lack of streaming talk at WWDC. Some thought Apple was saving it to impress people later, or waiting until they could ensure the service’s success, but it’s starting to sound like that isn’t true.
This is a huge negative in my opinion. I understand there is still some appeal to not having to store all the songs on your phone but still get to them when you want. And the ability to stream as it’s download is nice too, so it’s essentially instant. The downside seems to be that you have to remember to delete the songs later and constantly be cleaning up your iPhone if your music collection is too big, which to me completely negates the convenience iCloud is supposed to bring.