I haven't tried hitting play on something yet either -- will later tonight. I'm curious how the rental structure works as well. But it looks like it lives in the cloud. I wouldn't be surprised if they add some kind of "offline" feature like Rdio has at some point though. If this does move to Netflix/Rdio like subscription ... that would be amazing. The synced accounts ... the social stuff built in ... the fantastic design.
Or can you imagine the little things they can do?
You are watching Garden State. A song starts playing. You have some way (maybe through a UI widgit in the lower right corner) of seeing what the song is and bookmarking the artist on Rdio so that you can listen to more of their music latter.
Also hopefully they'll have the same deep level of API support that Rdio does (especially with Netflix killing theirs off).
Like I said, lots of potential. Hopefully it will all work great.