EDITED TO ADD (10/28): This is a more nuanced discussion of this issue. At this point, it seems clear that there is a lot less here than described in the blog post below.
The latest version of Apple’s OS automatically syncs your files to iCloud Drive, even files you choose to store locally. Apple encrypts your data, both in transit and in iCloud, with a key it knows. Apple, of course, complies with all government requests: FBI warrants, subpoenas, and National Security Letters — as well as NSA PRISM and whatever-else-they-have demands.
EDITED TO ADD (10/28): See comments. This seems to be way overstated. I will look at this again when I have time, probably tomorrow.
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