This is pretty neat, I had an idea like this a few years back, but didn't pursue it because one would have to think of what happens when there are 3 million people playing your hit game at once! I have to wonder if they have that many servers to render this? As well, the lag could be a huge factor in many game types.

Although on the bright side, this will completely eliminate piracy on any games using this. And you wont need to ever buy new hardware! Which would of course kill Nvidia if they aren't a part of this server farm.

I think this is the better solution, if they do it right. Check out Trion World Network:

http://www.trionworld.com/

It's a bit of a hybrid solution, and I think it will work and also kill piracy for PC games. Future games will have essential parts on the server only.