Here is what Apple says about How iTunes Match Works:
iTunes determines which songs in your collection are available in the iTunes Store. Any music with a match is automatically added to iCloud for you to listen to anytime, on any device. Since there are more than 43 million songs in the iTunes Store, chances are your music is already in iCloud.3 And for the few songs that aren’t, iTunes uploads what it can’t match (which is much faster than uploading your entire music library). Even better, all the music iTunes matches plays back from iCloud at 256-Kbps AAC DRM-free quality — even if your original copy was of lower quality.
Once your music is in iCloud, you can play it from any of your devices. Just browse the complete list of all your music stored in the cloud and tap to play to it. You can store up to 25,000 songs in iCloud (more if songs are purchased from the iTunes Store), but only what you play or download is stored on your device. Tap the iCloud download button to download music from an artist, album, or playlist. So you have immediate access to a huge music library without having to worry about the storage space on your device.
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GB