Did you try reading about it?
http://www.apple.com/icloud/what-is.html
Basically, if you're not familiar with what "cloud software" and all this stuff is, it's basically the storage of your data on servers elsewhere so that they're accessible from all your devices. Apple has rolled out iCloud, which will store contacts, calendar, reminders (from the iOS 5 Reminders app), photos, and more (including game save data if games support it), etc. It also offers an email service and a Find My iPhone/iPad/iPod touch service.
iOS 5 and iCloud offer something called Photo Stream. Whenever you take a photo on your iOS device, it will be uploaded to iCloud (when you are connected to WiFi, and if you're not, it'll wait until you connect to a network). These photos will be pushed to your other iOS devices (visible in the Photo Stream section of the Photos app) and your Mac or Windows computer so you don't have to transfer them over anymore. Of course, iCloud only stores 1000 photos max or the last 30 days worth of photos. The photos (on the server, not your devices or computers) will be deleted if they become older than 30 days, or you exceed 1000 (not all of them, just the oldest one). You can choose which photos you'd like to keep by saving them manually onto your iOS device or computer.
The music portion is regarding purchased music from iTunes. You can re-download previously purchased songs onto any of your iOS devices (or your computers), as well as have it so that a song purchased will automatically download to all of your devices.
