I like this idea, actually: for console gaming. If done correctly it could be revolutionary. Of course, if done incorrectly...
The compression technology must be extremely impressive if it can cater to high resolution gaming on a generic computer with a generic internet connection. Ironically I was just thinking if this was possible (for home use) but figured the bandwidth needed would be too high. Maybe it forces a low resolution?
Of course, the lack of mods for PC games would be a high concern. If they could address that, allowing a person to create and use mods for a game while still using their service, they could have something phenomenal.
OnLive users have an online profile that saves the games they have rented or purchased and tracks their progress. Users can peruse the service to watch other games in process and connect with friends or other users for multiplayer sessions. Players can save "brag clips" of their best performances; those learning a game could watch more experienced players. "This gives you the ability to think of video games as television," Perlman says. "Anything is viewable."
This is particularly interesting. Being able to watch another person play in real time is pretty cool, especially if you've seen a Let's Play video of something before. If they add in voice chat, all the better.
High-speed connections (five megabits per second or greater) allow for TV-based players to get high-definition-quality video.
5 Megabits = 0.625 Megabytes, presumably downstream only. That's pretty fast; my own connection caps out at 200kB/sec. Could be an issue.
It might become a viable alternative to console based gaming, but it doesn't seem to compete with PC gaming.