Microsoft confirmed that Windows Phone 7 devices, like the last couple generations of Zune players, will be able to sync music, video, and large images with a user's PC over a wireless home network--no sync cable required. Wireless sync is one of my favorite features of the much-maligned Zune.
Microsoft also has an online service called Windows Phone Live that will provide backup for photos, notes, and other information. This service is similar to MyPhone for Windows Mobile 6.5, but will use Microsoft's SkyDrive service (registration required), which offers 25GB of free online storage and is rapidly becoming a very interesting part of Microsoft's arsenal. (SkyDrive also provides a way to send very large virtual attachments through the recently revamped Hotmail, and is the main entry point and storage space for Microsoft's Office Web Apps.)
Microsoft is ready to compete with other cloud-based music services.
Zune Pass is available to users who want a subscription service, which lets you pay a monthly fee for unlimited streams from a catalog of millions. The company hasn't officially said that Zune Pass will be available on Phone 7 devices. However I fully expect to see it on the device.
For users who want to store their personal music collections in their own online music locker, then stream or download it to their mobile device, Microsoft could add music to the type of material that can be synced with SkyDrive. The easiest way would be to add an option to the Zune PC software that would let users upload their libraries to SkyDrive, then update Phone 7 to enable streaming or downloading from that service. Windows Live ID (formerly Passport) would make the experience relatively seamless--just sign in once from Zune, SkyDrive, or Phone 7, and Microsoft would be able to associate your music in the cloud with all the devices you have.
The third option would be streaming directly from a PC over the Internet to a phone with no intermediary service--like Simplify Media offered before being bought by Google. Here, Microsoft could use the technology from the Remote Media Streaming feature of Windows 7, which lets you stream music and video from your Windows 7 PC's library to any other Windows 7 PC, again using Windows Live ID for authentication. Microsoft would simply put a Remote Media Streaming option into the Zune client software (it's in the Windows Media Player today), then make sure that Phone 7 could connect to it. Bonus: this might be a Windows 7 feature only, spurring upgrades to the new OS.
Many users of Apple's iTunes have already said that they'd be willing to pay for a cloud-based music service from Apple. Imagine if Microsoft launched a similar set of services for free. Surely that would get Apple fans talking, if not switching.