It's not just an idea anymore, they actually did it!
Imagine how this will change the industry. Maybe not in it's first year, but eventually.
It's hard to just wrap your head around the possibilities...

San Francisco, CA - March 24, 2009, 7:16PM - OnLive, Inc., the pioneer of the on demand era of video games, today emerged from seven years of stealth development within the Rearden incubator to unveil The OnLive Game Service and OnLive MicroConsole™ at the 2009 Game Developers Conference. OnLive is a revolutionary, on demand video game platform delivering the latest and most advanced games instantly, on any TV via a sleek, inexpensive MicroConsole, or on almost any PC or Mac. OnLive is supported by many of the top names in the video games industry including Electronic Arts, Ubisoft, Take-Two Interactive Software, Warner Bros. Interactive Entertainment, THQ Inc., Epic Games, Eidos, Atari Interactive and Codemasters.

I think this simplifies the whole gaming industry, from developer to consumer and can attract a lot of new consumers.
It looks like they've gotten over the biggest issues they were faced with, such as lagging and running it on every pc and on mac and even on a plain TV, if you own their (very small) console.
They're focusing on the north-american market as a start, so we here in Europe will have to wait for them to build the server infrastructure. After that, your low-end laptop will do just fine as your main gaming device. Or you just move over to your TV or Beamer and you have exactly the same service.

It's all on their newly launched website and there's a presentation from GDC on Gamespot.

www.onlive.com
http://www.gamespot.com/shows/on-the-spot/?series=on-the-spot&event=on_the_spot20090324

I'm wondering what this means for future advancements in graphics and for game engines.
So far they're running games that have been developed for PC or Console, but when developers start to create games for this service specifically we will get much closer to prerendered quality as you see in feature films today.

Very nice. And great idea btw.
This will also stop pirated games.

//This will also stop pirated games.

i dont think so, they'd find their way anyway

But it's gonna and cheating!
And OMG if this runs fast and free of lags, video game consoles and expensive gamimg pcs will be uncalled-for.
My, this will revolutionize the gaming industries. I hope this will work fine and be affordable!

Yes indeed, this will completely stop piracy in any games that can only be accessed through such services, theres nothing they can do. And will revolutionize the industry, although it may be a bit too soon yet, I had thought it would come 5 years from now, but it doesn't hurt in starting this within a year. Great time to be a developer(you won't need a publisher past their marketing anymore). Gamestop, used games, and game rentals were the developer gets nothing will die to. Although I'm just happy piracy will be gone, because it is killing the PC industry.

It would certainly revive the PC industry, though it hasn't been dead or even dieing I think.
But even more important is that it will bring all the gamers together, consoles and pc's can play against each other, or well at least the ones playing on a PC and the ones playing on a TV (replacing consoles).

I think i all depends on the business models they come up with.

If you still have to buy every game, if you want to play it, then they're kind of stuck in the past.
But they could offer a package, where you pay some amount per month and then you can play every game on their service, and depending on what games are being played the developers get their shear of the monthly fee, much like the Television industry works. That way an indie developer would get as much for the played minute as a big time developer.
It would be all about how many people play your game and how long.

I remember the demoreel showing the technology. Here I come, mobile Unreal!

This thing is going to change alot in the industry. I'm looking to see when first real games start to come out. Think of the MMO possibilites!

Great idea! But as I saw they offer free demos, rentals and buy options... So we'll have to wait for the final strategies.

I don't think that you can copy a game wich you only have the rendered information of... All the gmae logic, etc. pp. is stored and running on a server, you only get send the rendered images or the information for your graphics card how to render it. It makes it really impossible to pirate a game.

But people will still be making console games, unless they expect everyone to be buying this console.