Steve Jobs demoed iCloud and never really used the word sync.
At he spoke about how everything would just automatically go to all of your devices (including your Mac/PC).
But how does it really work?
Well not so automatic, let's look at the fine print:
iOS to iOS Document Syncing:
If you are only syncing iOS devices, it is very seamless, and works very well: Create a document in an iOS version of an iWOrk app, and those documents appear on all of your iOS devices. You can open the documents on any of your iOS apps, edit them, and those changes are updated everywhere.
iOS to Mac/PC Document Syncing:
Once you add a Mac to the mix, the problems arise:
First of all *nothing* is (officially) automatic on the Mac — you have to upload and download documents to and from each of your Macs using the iCloud.com website.
Second of all, the iOS and Mac versions of the iWork applications have different features, and more importantly, different formats. This means that the document format has to be converted before it can be used.
So there is no way to directly open a Pages document created on an iOS device on the Mac. A conversion process has to take place first.
Currently, this happens via the upload/download process of the iCloud.com website.
The implication here (beyond the manual upload/download process), is that this means you will be creating multiple version of documents — anytime you want to work on an iWork document on the Mac, you have to download it from iCloud, edit it, then upload it back to iCloud. Each download creates another version of the document.
I think these are only short-term problems, and these behaviors will probably change in future versions of the OS and with application updates.
Mac-to-Mac Document Syncing:
Note, this is an undocumented, unsupported feature of iCloud. Do not rely on it on for important documents without backups!
Behind the scenes, iCloud stores documents locally on your Mac in ~/Library/Mobile Documents.
Any document you place in the folder, is automatically synced to all of your Macs. You could use this "feature" to place any kind of document, and have it pushed to all of your Macs, ala DropBox.
I have created a diagram illustrating this process:
Here is a printable version of the diagram:
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