The introduction of iCloud, iOS 5, and iTunes 10.5 let you choose how you back up the unique data found on your iOS device. Apple lets you opt to have an iOS device directly send the incremental changes of its data to iCloud instead of storing versions on a single Mac or PC to which the iOS device is associated for syncing via iTunes. It’s a tricky choice to make, and at any time, you must choose one or the other. (You may manually switch between them at will, but not employ both simultaneously.)
Apps and purchased media (books, music, and video) aren’t backed up from the device in either scheme, and neither is stuff you ripped or purchased elsewhere, such as music and video. If you restore from iTunes, which was the only option until October 12th, the device’s data storage is erased and the backup used to restore your unique items, like stored documents and app and iOS settings. After that, any iTunes item you had set to sync are restored in a following pass.
An iCloud restore proceeds much in the same way. You choose to restore the device either from a working iOS system or through iTunes if the device is crashed, and a Wi-Fi or 3G connection is needed to retrieve the unique set of data. For my iPhone 4S and iPad 2, this data about 3 GB. Following that, however, any purchased apps and music are retrieved over the Internet directly from Apple’s servers. Videos are not.
Even if there’s a local copy on iTunes on the local network where your own media items are stored, iCloud must retrieve data over the Internet, or you will have severe problems. I had to do a second restore after trying to mix iCloud and iTunes restore, after which music files were missing or unusable, and I lost all folder and screen organization.
This is rather inconvenient when you have a large set of apps and purchased music. I had 13 GB of apps and other purchased data, as I have a number of GPS apps that I am testing.
Something here about getting bandwidth on the road. Emergency backup? So that you can get yourself back to normal up to the moment, instead of losing stuff you’ve created while traveling. Not a replacement for iTunes backups and sync restoration, but if you travel a lot, probably a great option. If you have your iTunes with you on a laptop, maybe less so.