I just don't see how something like this can be cost-effective. I'm not familiar with the "cloud" computing thing, but it seems like they would have to have an enormous stock of spectacular hardware server-side to play these games. I've heard the detractors say that OnLive would basically have to have a dedicated "PC" (physical or virtual) for each and every subscriber.. I mean, you can't have a single server rack actively playing a thousand instances of Crysis simultaneously.
I could see something like this working on a small scale.. remote computing from a device in your living room to your computer in another room, but that's about it.
And at what point does it stop being cost-effective for the gamer? The OnLive device itself will have a cost, of course.. it might be cheap, a hundred bucks or so, or it may cost the same as a PS3. And what about the subscription fees? And the price of the full game will probably be comparable to today's game prices.. $40-60 each. At first it might be cheaper than owning your own console or gaming PC, but for how long? Eventually, it'll end up being cheaper to just buy an Xbox and have physical copies of the games. And, of course, the question of what happens if it doesn't take off. Sure, it might work out well at first, but what if they don't get the numbers they want? The service goes down, the box becomes useless, and all of your games disappear in a puff of money.
And that's not even going into the latency issues and visual/audio quality. All of the tests we've seen so far are running, for all intents and purposes, locally. That GDC conference was probably running on a dedicated T1 line with a direct connection back to their studios, and not over a standard ISP-provided internet connection like real people have.
Of course, they could try marketing this to the more casual gamer.. the one who isn't going to go buy their own console or gaming rig. But on the flip side, a casual gamer is far less likely to have the necessary internet connection.
Count me out. I'll stick with my own PC, where I can play whatever I want at full resolution with zero compression and zero latency.