I think the way Plex Cloud works is that Plex (the company) has hosted servers...most likely on EC2 that provide the computing (transcode) power. Then you hook in your cloud library to that. The 3 transcode limit was something they said they were going to implement when it comes out of beta. Currently right now there is no limit while its still beta.
With that said, there appears to be many Plex pass users who still haven't gotten an invite and there is wild speculation that Plex cloud is dead in the water.
What I think the future should be, is a way to hook into the transcoding engine that Google and Amazon already use for videos. When you upload videos to Google Drive, Google uses their youtube engine to process and convert your video into mp4 and flv formats and various resolutions behind the scene. This is why when you go into google drive and hit 'preview', you are able to play the video on your browser, and on your phone, etc. All of these formats are h264 and aac encoded.
I submitted a feature post on this forum where we are talking about trying to get rclone to parse these files and show them in the mount or provide a way to download them via a command.