As you may remember from this year's WWDC conference, Apple is releasing iTunes Match, part of iCloud which is designed to look up the music you have in your iTunes Library, and then allow you to listen to that music from any of your apple devices, including iPhone, iPod touch, and iPads.
While at first this seems like a really cool idea, what you don't realize is that there's already a much better service out there called Spotify, which costs more (roughly $60/year vs $25/year), but allows you to listen to any song from any of your devices. This includes iOS devices as well as PCs and MACs.
Spotify does also offer a free version of their service which simply adds in audio advertisements (similar to Pandora), but the free version doesn't allow you to stream to your mobile devices, or download songs for playing offline later. Still, if you're looking for that one-off song that you just can't get out of your head, or looking for similar songs that you don't already own, Spotify fits the ticket.
So, if Apple is to compete, they'd need to lift this restriction and allow you to listen to any song even if you don't own a copy of it, from any device, and allow you to listen to them offline as well. If they added that (and kept the lower price), surely it would easily beat off Spotify. The iTunes interface is way more refined then Spotify's, but you can't beat being able to listen to any song ever produced (and no, I have not found a single song that isn't on their system).
Sorry Apple, looks like you fell just short of the mark this time.