You play games over the Internet and your screen acts like a dummy terminal that operates hardcore Cloud gaming rigs (or virtualized rigs) like VNC operates remote desktops. These GPU data centers are located throughout the US because, as you might expect, the latency of button pushing and seeing the result of the button pushing is what has held up these type of scenarios in the past.
Perlman tells his (alma mater) Columbia University audience that Onlive has solved the latency issue. The round trip is only 80 milliseconds if the data center is located within 250 miles of the gamer. According to Perlman, that is short enough time to fool the mind into thinking the action is instantaneous.
Of course this doesn’t just make sense for Macs and PCs. It scales to TVs and iPhones as you can see 20 minutes into the video. What is interesting about this technology is that it instantly levels the playing field for gaming devices. Macs, PCs, TVs and iPhones all have access to the same titles and technologies. As you can see in the video if you watch the whole 47 minutes (recommended!), there are so many other possibilities of social gaming and moving beyond gaming to live sporting events and such…as long as they can keep the latency to a minimum. (Via JoyStiq)