Will this work? There are many challenges, with latency being the biggest one. Controller events need to be captured, sent to the server system, where they impact the gameplay, which then causes feedback onscreen, which is streamed to you. This round-trip latency may be noticeable if it is much more than your brain's control loop time. Existing multiplayer games experience this as "lag" and it is very annoying, so it may be a problem here too. The LA Times quotes an OnLive exec as saying they want to bring that latency down to 1 millisecond. While they may be able to use prediction and other things to reduce perceived latency, actual packet transfer time is bounded by the speed of light. This means a packet could, at most, travel on the order of 186,000 miles in a second, or 186 miles in a millisecond. (Best case, of course, as there is overhead and signal propagation is often slower than the speed of light.) Therefore, unless they place their servers in every city, 1 ms doesn't make much sense. But then again, perhaps the newspaper misquoted or misunderstood and I am just interpreting it wrong.
I wish OnLive well and look forward to seeing how well it works.
