iCloud is for Syncing Devices NOT Storage
It seems that many posters as well as the author have completely missed the primary function of iCloud. It is NOT storage!
It is for syncing the data (files or otherwise) on all of your computing devices.
You data STILL resides on your local device even when it is in the iCloud.
When you create or change a file on one device, the iCloud service will automatically upload it to the iCloud and push it down to your other devices. In some cases you will have a choice of what to actually download/store on another device.
For example, while all of your photos will be kept on your Mac using iPhoto, only those photos you choose will be stored on your iPhone and/or iPad.
Don't take my word for it. View the keynote video of the Apple WWDC and it will be very clear.
Biting the hand that feeds IT
