The games that are currently featured in the Onlive beta are suprsingly playable. I do notice a little lag, but still you get used to it quickly and it doesn't really distract from the experience. I have Verizon FIOS by the way (15-20mbps). I'm just suprised by how well it works.
I'm actually more interested in Onlive's competitors, Gakai and OTOY. Gaikai is going the route of having publishers using GaiKai's service to host games for people to try/buy/rent. The publishers rent space on GaiKai servers. There is no portal like Onlive. The could be a banner on the publishers website "Play Mirror's Edge" now. You click and you intsnatly start playing in a window. GaiKai is't aiming to replace consoles so don't expect 720p resolution, etc. They are just providing a service for publishers to get their stuff out there. Also, they have plenety of servers around the US so lag shouldn't be a concern. GaiKai has also teamed up with InstantAction to offer games on Facebook
OTOY, on the other hand, is licensing there technology out to publishers. Imagine, if Valve licensed this tech and had all of their games available to play without the hassle of downloading and installing the game as long as you purchased it. They could set up multiple options (stream (play anywhere) /download) and they can control the pricing and availability. I have seen Left4Dead running on OTOY's setup and it looked pretty good. GTA4 was also running on it. As far as Valve is concerned it would be good for business.