iCloud, just like the name sounds, is cloud storage for your iDevice. This means that you can access your music, photos, contacts, and calendars on all of your devices, even if the content is not stored on your iDevice.
When you sign up for iCloud, you automatically get 5GB of free storage. This is used as a backup for your device if it gets ruined or lost. iCloud will automatically backup your device whenever it's plugged into a power source. If you need more than 5GB of storage you can purchase an upgrade from your device. The cost is $20 a year for an extra 10GB, $40 a year for 20GB or $100 per year for 50GB.
If you plug your iDevice into your computer and use it for backup like I do, it's not really necessary to purchase extra storage. If you don't connect your device to a computer, it's wise to use iCloud and purchase the necessary storage so you don't lose your photos, documents, data, contacts, etc. if something unfortunate happens.
You can choose what you want stored in iCloud. This includes email, contacts, calendar events, reminders, Safari websites, notes, Passbook information, passwords, photos, and documents and data. Go to Settings > iCloud and toggle on those things you want stored in iCloud.
In addition to storage, iCloud can be used to share your content with any other iDevice that is registered to your Apple account. For example, if you purchased a song or movie from iTunes on your iPad, you can also listen or watch on your iPhone, without downloading it, using iCloud.
iCloud also makes it easy to share photos with friends or loved ones. You can choose up to 100 people to see the photos you've taken with your iDevice. A photo stream can be created for each event such as family reunion pics, a holiday, or your summer softball team. Invite who you want and they can also post their own photos and videos to the stream.
Another great feature of iCloud is Find My iPhone. Not only can it locate and show you your iPhone's location on a map, it can also lock your device or even erase it if you believe it was stolen. Find My iPhone can be set up to display a custom message, such as another phone number to call so it can be returned to you if found by a Good Samaritan. Find my iPhone is also available on the iPad, however, if it doesn't have a cellular carrier, it has to be connected to a wi-fi source to show its location. One way to use Find My iPhone, that my husband and I have found useful, is to keep track of where our kids are with their iPhones. Not necessarily that we're spying on them (which a parent can definitely do), but we use it when they are on school trips to see their location and about how long it will be before we need to pick them up.
If you have a new iPhone or iPad, set up iCloud when prompted on screen by entering your Apple user ID and password. If you haven't set up iCloud on your iDevice, go to Settings > iCloud and enter your Apple account information. You can also go to icloud.com to view your iDevice's content.
For more information, visit Apple's website.