My experience was this:
1) I had a collection of 3000 songs on my hard drive of my Windows computer.
2) I started a subscription to iTunes Match.
3) The Match service scanned my music collection, and as far as I can tell it uploaded a number of my songs to the service cloud. (based on the cloud status indication in the iTunes GUI)
4) But judging from the cloud icons none of the songs remained on my local hard drive. For each of the 3000 songs the cloud-with-down-arrow icon indicated that the songs were only in the cloud, not on my PC.
5) I had evidence that the songs were not deleted from my PC, because the size of the iTunes library was the same and in the Windows file system I could still see the song titles, but as far as the iTunes GUI was concerned all the songs were in the cloud and not in the hard drive.
6) When I tried to play the songs, there was a startup delay, as if the song was being streamed from the cloud and not being played locally.
7) When I tried to play the songs without a WiFi connection they would not play.
8) I had to painfully download all 3000 songs one by one to restore them to the original state.
I'm left with a very bad taste about iTunes Match. It's the worst experience I've had with any Apple product or service. I'm seriously considering jumping ship from iTunes to some other music service, and I've been a loyal iTunes customer since it's inception.
-timmccar