You can indeed delete all the contents from your iTunes library if you use iTunes match, however this is not something I would recommend. From time to time songs or albums can be removed from the iTunes Store, if this occurs you will no longer have access to them if you do not have them on your own computer.
iTunes match on your mobile device starts off with a list of all your content from iTunes, but at that point it is not downloaded. You would need a Wi-Fi or 3G connection in order to download them and listen to them on your device. However once something is downloaded to your device it will stay there until such time as you choose to delete it.
If you subscribe to iTunes match and remove all the content from your computer, then allowed your subscription to expire without re-downloading it, you would lose access to anything that was not purchased from the iTunes Store to begin with. Anything purchased from the iTunes Store can always be re-downloaded using iTunes in the cloud even without your iTunes match subscription.