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What is I-cloud?

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iCloud, included with iOS 5, iOS 6, and OS X 10.7.2 and above, is a service in which all your Photos (via Photo Stream), iTunes Music, Contacts, Calendars, Apps, Backup Data, and more are pushed across all your devices (iPhone, iPad, iPod touch Mac, or on the web at iCloud.com). iCloud comes with 5GB storage and iCloud Mail with an @me.com and @icloud.com format (no ads) and Find My iPhone- Free. To learn more, visit www.apple.com/icloud

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Keeps asking me to "buy" extra space.

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Salsander

iCloud is used for Apple devices as sort of an extra storage space. You can store applications and whatnot onto this online cloud. This used to given extra space on your apple device.

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It's a place to store things from your I device. That's why is "ICloud". It will save all your stuff you want and if you reset your i device u put your apple I'd in then you u can get it back. Quite handy.

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No, iCloud doesn't store your content on an external server. It 'pushes' your content from one device and makes it visible, downloadable, and editable on another device. The reason storage (5GB for example) is even counted is for Backups, Contacts, and Calendars, etc which are stored in the cloud. The rest is not stored in the 'cloud' and is pushed amongst your other devices (i.e. Apps, Documents...)
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