I have been doing both every night (although the wifi sync has not been working perfectly). What exactly happens with iCloud and what exactly happens with wifi sync? I'm only interested in hearing the responses from someone who actually knows and is not assuming. I need to know since i'm yet to find info online to fully explain this.
You are mixing up two different things: backing up and syncing.
They are not the same. Backing up can only be done one of two ways: during iTunes syncing or via iCloud.
Therefore you can sync to iTunes and STILL be backing up to iCloud.
Syncing is no different than what we always did via USB cable. It syncs your new music, adds any apps added via iTunes and not in the iOS device yet, new music, etc.
Backing up is the same whether you choose to do it via iTunes or iCloud, with the difference being that iCloud backups are available anywhere you have an internet connection.
Backing up saves just about everything on the iOS devices except apps, music, etc. (the stuff that "syncs"). So the backup will include app data, settings, camera roll, etc. Many of the items backed up are not included in normal syncing (e.g., camera roll).
Michael