Basically in this service you hook up a box to your computer or your TV as well as a high speed internet connection. This box facilitates communication to web connected servers that run video games for you. Instead of doing processing for graphics or physics or any of the real leg work a computer normally does during game play this processing load is outsourced to computer clusters specifically designed to handle said tasks and send the appropriate responses as fast as possible.
This is the same concept used during the initial stages of computer development (big iron type monsters) where immensely powerful servers/clusters ran all the processing and data handling for numerous virtual PCs (aka terminals). These terminals had no hardware of their own aside from the basic interface devices needed (monitor, keyboard, mouse, etc) and only existed separately within the main frames virtually with usually no physical boundaries. This setup stopped being feasible as the technology became smaller and smaller companies wanted to spread computing power out geographically instead of having only people working a building with a main frame have a computer.
Now that data transfer rates over the internet have increased dramatically with the widespread inception of high speed internet connections (DSL, cable, FIOS, etc) this terminal type of organization can again be beneficial. It has always been far more cost effective to have one centralized cluster divided up into virtual terminals for any significant amount of computer processing (a video game for example) just because of the way computer technologies scale. This type of organization was dropped because of its inability to spread geographically, now that problem has been solved by the wide spread availability of high speed internet.
The Onlive service offers some interesting features and capabilities that I think will cause alot of changes in the gaming industry. First it gives you the ability to play games from any platform (xbox 360, PC, PS3, wii, etc) on a TV or pretty much any computer with just a simple box which is pretty crazy. You no longer need to invest in several gaming platforms costing hundreds of dollars apiece just to play all the games you want. Second, it allows for spectating of games like never before. You can go see game play from games without even purchasing them, you no longer have to trust videos posted online that may or may not be fake, you can see how the game works with your own eyes before you even spend a penny. You can watch others play (if they have turned spectating on) to get pointers on how to beat things, or how to be better. You can go watch your friends play, even help them if they are having difficulty with something, or want to show you something. I think this may result in some games based more on collaboration instead of individualism, it brings new exciting elements to coop type games.
There's plenty of other cool stuff the system can do, but what really sold me is the work the creators put in before they even announced the system (they kept it fairly heavily under wraps until yesterday). The creators have gotten 7-8 MAJOR game publishers (Atari, EA, Codemasters, and Ubisoft to name a few) to put their best selling games on this system. I am but a humble observer, but these creators have convinced major publishers that their new and untested system has enough potential that huge companies can put their name on it without fear of reputation loss. That speaks worlds of the system if entrenched studios like EA would support it.
Here are the two interviews given at the GDC announcing the system.
just by the way Percepturally, not really a word...
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