Apple suggests that iPhones could sync metadata (placeholders) instead of the actual media.
According to AppleInsider:
Using this metadata, iPhones and iPods would contain "virtual media items" representing every playlist, video, photo, and mobile game stored on their computer, even if the sum of those files would ordinarily be too large to fit onto the devices' hard disk drive or flash drive. This is possible because metadata capable of representing a media item consumes only faction -- typically less than 1 percent -- of the space required to store the media item itself.
"As a result, the user perceives that the virtual media items may be available on the [the media player]," Apple said. "In this manner, the virtual capacity of an electronic device may be increased."
This type of connection would also allow users to manage their iTunes libraries remotely, reorganizing, deleting, or adding media while mobile.