This cannot possibly work. No matter how well they compress video there will ALWAYS be lag. The lag will be doubled too, because first your device must send the inputs to the server before the server sends back the video frame.

Anybody ever use screen-sharing on a video chat like Apple iChat? Have you ever tried to play a game on someone else's machine over the internet this way? It doesn't even work at lower resolutions, so how can we expect OnLive to actually send the frames in time?

The only possible way to make this work would be if they had figured out how to use quantum entanglement for communication... and that sounds pretty far-fetched!

(on the other hand, the makers of OnLive must have reason to believe it works: they've got quite a bit invested into this idea.)