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Apple split up the functionality of iTunes on the iPhone and iPad several years ago, so really they are bringing the Mac in line with the iDevices. There are advantages and disadvantages both ways. As far as I can tell, they haven't really removed any obvious functionality in the split up. You can still have a local library. Of course, the splitting up of iTunes is something that has been ongoing for several releases. Books and podcast were split off some time ago. This release splits off video and audio books from the music.
I maintain all my music, movies and audiobooks in my local library on my main desktop Mac. I have a large drobo raid that I use for that purpose. On my macbook pro laptop, I tend to leave most of the media in iCloud to save disk space. On my iPhone, I keep certain playlists and media downloaded so I can listen even if I'm in a internet dead spot.
For the most part, bringing the Mac in line with the iDevices makes a lot of sense. Being an audiobook listener, the fact that the mac and iDevices handled audiobooks differently was a source of frustration for me.
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