OnLive presented a concept of an upcoming cloud computing based "micro console" at the Game Developers Conference in San Francisco. It's an interesting concept, the console from OnLive will be significantly cheaper than any current-gen console but will enable you to play graphics intensive games like Crysis on your TV at 720p with quality settings at nearly maximum.
Cloud computing is what makes this possible, the processing isn't done on the OnLive console client but on one of OnLive's servers, which then returns the video feed to your console. While the hardware will be very cheap, the drawback is that you'll need a fast Internet connection and preferably an ISP that doesn't have a small cap on Internet downloads. The company says you'll need at least 1.5Mbps for standard TV quality, and at least 5Mbps for 720p HDTV. Lag could be problematic for such a service, but OnLive claims it will be blazing fast.
Games will be available on-demand, without any install times. Major publishers including EA, THQ, Codemasters, Ubisoft, Atari, Warner Bros, Take-Two, and Epic games have already shown serious interest in OnLive, indicating this console may actually get off the ground.
The concept is simple. Your controller input isn't going from your hand to the controller to the machine in front of you, it's going from your hand to the controller through the internet to OnLive's machines then back again as streamed video. Whether you're using a USB gamepad, Bluetooth wireless controller, or tried and true keyboard and mouse, the processing and output happens on OnLive's side, then is fed back to your terminal, with the game "perceptually" played locally.
In other words, it's cloud computed gaming.
Using patented video compression in tandem with algorithms that compensate for lag, jitter and packet loss, OnLive delivers video at up to 720p resolution at frame rates up to 60 frames per second. Of course, the quality of the video feed relies on your connection.
More details can be read at Kotaku. The site tried a quick online game of Crysis Wars on the OnLive console at the GDC and reports it worked better than expected.