What happens to the downloaded iTunes Match files next year if someone doesn't pay the $25? I've heard rumors that you get to keep the files. Is this true?

Indeed, "matched" songs that you have downloaded to your iOS device or computer will stick around after you cancel your yearly iTunes Match subscription. For example, if you own a bunch of lower-quality 128kbps MP3 files that you ripped from a CD 10 years ago and you use iTunes Match to "upgrade" those tracks to the DRM-free 256kbps iTunes Plus (unprotected AAC) format, then download those tracks to a device so they're accessible offline, you will be able to keep those files no matter what.

What you do lose when you cancel your iTunes Match subscription is the ability to continue having your songs matched with content from iTunes and the ability to have your non-iTunes songs automatically uploaded to iCloud. Once you cancel your subscription, you'll have to go back to syncing the "old" way—plugging your iOS device into your computer (or wirelessly syncing, thanks to iOS 5), or simply copying the files over to your other computers.