How does malware detection work in the cloud?

Cloud-based security is nothing new. In fact, Security-as-a-Service has become both the norm for vendors within the IT security market and an indicator of how far the cloud has evolved when it comes to being a trusted place to do business. If we accept that the cloud has forced a welcome change upon the IT security delivery landscape, so we must equally accept that the bad guys are also taking advantage of new methodologies (including the cloud) to deliver malware. So how does malware go about avoiding detection?