It seems today Apple has released iTunes match. iTunes match is what will take your entire music library and store it on iCloud instead of just your iTunes store bought items. iTunes match is free for developer testing and developers will get a three month extended trial membership if they purchase the service for $24.99 when it is released. Release notes:

iTunes Match stores your complete music library in iCloud, allowing you to enjoy your collection anywhere, anytime, on any iPhone, iPad, iPod touch, or computer. iTunes Match beta is currently available to developers in the United States. Beta subscribers will receive iTunes Match service during the beta period plus an additional 3 months for free with their 12 month paid subscription.
To get started with iTunes Match, download the current version of iOS 5 beta and iTunes 10.5 beta 6.1 with iTunes Match. Once installed, choose Turn On iTunes Match from the Store menu, and click “Subscribe for $24.99.”
Please note that you must maintain a local backup of your iTunes library as well as any music you add to iCloud. Apple will periodically reset your iCloud library during the beta and it is critical that you backup your music regularly. Some features and optimizations of iTunes Match will not be available during the beta.

This is a great way for Apple to compete with amazon and google for their music locker services.
[Apple Developer Portal]