Dotted grey circle in itunes 11

So I cannot say I'm overly pleased with some of the recent updates Apple has released. That said, I'm pulling all my music off the iCloud. Simple reason, I don't feel I should be penalized by AT&T for downloading music (when no wi-fi available to me) music I've already bought and paid fro from iTunes. Essentially I'm being penalized for NOT going outside Apple/AT&T "preferred" circle. I'm tired of nasty grams from AT&T telling me I've exceed my UNLIMITED plan! So I'd rather manage my music manually and not have to worry about this crap again. Now, to my question: What do the dotted grey empty circles mean? The song it is next to is also greyed out.

Very frustrating.  Tried your suggestion but haven't had any luck.  Dragged and dropped albums easily yesterday.  Today, no such luck.  They appear normally in iTunes on my system, with correct album artwork for all songs, but on iPhone 4 are grayed out with little dotted circle.  Songs are checked.  When I try to edit them ("get info"), the album artwork box is actually not visible.  For an individual song, the album artwork tab is absent, and for multiple songs at a time, it just says "artwork" without a box present.  All the text is grayed out and un-editable. 
Any other suggestions?  I truly am so ****** off about the changes in iTunes.

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