All you have on your phone by default are your playlists with match.
You need to have internet connection on your phone Wi-Fi or good quality stable 3G/LTE over mobile.
What this does is save storage on your iOS device at the expense of using data.
When you select a track on your device the iTunes store is poled and the track streamed to your device.
(Reason for needing good broadband bandwidth and data package over mobile !)
By taping on the cloud icon next to the track name on your iOS device you can also download the track to your iOS device (taking up storage) and that track can then be played Offline.
You can choose individual tracks or complete albums.
Now back on your computer things are different.
iTunes continues to be linked to your local music files by default, however if you choose to you can delete the local track and replace it with the itunes store version.
I am doing a poor job of describing my situtuation. Match is set up correctly, as it is perfect on my Apple TV, on the iPhone however it has not elimanated my local library which I thought was supposed to happen. If I do delete a song it gives me the cloud icon and the option of downloading it. I did this to free up some space on my 32G iPhone 5; I have turned off wifi-sync. I have turned Match on and off on phone, it does not change the song count on the phone.
Prior to enabling iTunes Match, you can delete all Music from the device. This will allow you to add back only what you want with iTunes Match enabled.
Ensure you have a secure backup of all Song files first, then the method for removing music is as follows:
- Tap on “Settings” and tap on “General”
- Select “Usage” and tap on “Music”
- Swipe "Music" and select “Delete” to remove all songs from the device
The step you are missing is connecting your phone via the supplied USb cable to your Mac/PC and opening in iTunes.
If you do this and click on devices and select your iOS device then select Music settings you will find that provided Match is selected the prevoius manually loaded music will be removed.
Now disconnect the iOS device from the computer and start using Match properly .
That is to,say the device will dowmload the playlists and allow either streaming or downloads from iTunes store direct to the device for offline playing.