Note that Google and YouTube are taking the carrot approach, not the stick: You'll still be able to search for and play back any music video you want on YouTube, just with ads, I'm told. (I would assume there will be many blurbs promoting Music Key, as well.) Google representatives told me that the new features are conveniences that users (and artists) will appreciate.
Specifically, Music Key will allow music to be played back even when the phone is locked or while using another app. And while it isn't quite clear how much music (or what) will be cached offline, it will be stored there for a period of days before the user will need to resync.
Meanwhile, you'll find that the Music tab on YouTube is already live. My page shows off my incredibly bland music taste, my search for amusing videos for my kids, and my son's obsession with Ray Parker's Ghostbusters title track.
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