What does having an iTunes account do for me?

I wound up with some iTunes gift cards. I understand that they can only be used to buy stuff in the iTunes store. So, what does setting up an iTunes account allow me to do? What are the advantages? Someone told me that there a lot of hassles and restrictions. For example, you can’t readily move music from one device that you own to another, you can’t burn music or videos to CDs, the music is in a proprietary format, etc., etc. Is this correct?

Also, I was checking the iTunes terms and conditions, and it says,
“You may download previously-purchased free content onto an unlimited number of devices while it is free on the iTunes Service, but on no more than 5 iTunes-authorized computers.” Huh? “previously-purchased free”? How can something be purchased yet free? What can they be talking about?