According to John Gruber, Apple will implement a new system for solution conflicts between the files in iCloud, a system that will take the decision from the hands of the users and transfer it to the Apple servers. If you have used MobileMe, then you have probably been stopped several times by the Conflict Resolver window that will tell you that there is a conflict regarding the contact list or entries from the calendar application. Then MobileMe will ask you to choose the file that you think is the best, but in iCloud the servers will choose the file by themselves without problems based on the date it was uploaded to the server and the conflicting information between the files.
In iCloud, I believe you will never be presented with [a sync conflict] dialog, no matter how much has changed in one of the instances while it was "offline". The server-side iCloud, when there seems to be a conflict, will make a decision and it will decide which one is the best (in Apple's terms the "truth"). That is what Steve Jobs means when he says "The Truth is in the Cloud." iTunes will decide which one is right and that's it. iCloud will push that right one to any device that has this account that has a different version.
But, here's the trick what happens if it's not the right one? On the server side, it will remember all of the other ones, almost like versioning. There will be some sort of interface like "go and look at your contacts." There will be some sort of way to say "show me previous versions and let me pick the one that is right". You pick it and push it back up into the cloud and tell it "that's the truth" and Apple will push it out.
Of course, such a system could turn out to be not so great for users who will wake up with contact backups that are either too old or too new and do not contain what they need. To solve such a problem, Apple will give users the opportunity to access old backups for their own terminals and by accessing these backups we will have the opportunity to install old information over or together with the new ones. We will learn more about this new system in the fall when iCloud will be presented again and officially launched.
