Being that I have no actual play time or experience with the new start up OnLive, I can really only voice my opinions and thoughts on what I heard and read about the GDC meeting. For those of you that don't know, OnLive is a new company that is setting out to revolutionize the way we play and access games.
Now before anyone goes all crazy about the big 3+1 having a stranglehold on the gaming market, I'd like to point out that OnLive offers one thing that the others really can't, no hardware restrictions for users. The thing that makes OnLive so odd is that they are actually streaming a game to you, much like a giant video. The answer to your question is some unnamed new compression techniques 7 years in the making. This new compression and decompression makes a 100ms lag time a thing of the pass in favor of, get this, 1ms. To be honest, I don't believe that number unless you are running Gigabit LAN and are plugged directly into their data centers. Reason? ping Google. I got an average of 76ms. Google has pretty much the most impressive set of data power on the planet and I pay for fast internet, 10 down 2 up, and I still got 76ms. Is that anything to be ashamed of? No, not really. Would I really notice a 76ms lag, again, no not really. However, in a ping I'm sending what, 32bytes of data, a streaming 720p video is much larger...much. So I have my skepticism about their lag times.
They (OnLive) do offer a new array of tricks though that I can say haven't been offered [read:feasible] before. Such as viewing your friends playing live. It is like spectating, except you can do it for any game, any time. Since you are technically just watching a video, you are only limited by OnLive's servers, which are supposed to be spectacular. Also, this means you aren't limited to a platform. They have a little adapter that uses HDMI to go to you TV, and of course OnLive works on your PC or MAC via a download. They said plugin for your browser, but I'm not sure I want to be playing a game within Firefox or Chrome, just doesn't seem natural. This means that once you buy the little box thing for you tv, you can install the plugin for your PC and pick up right where you left off. Pretty nifty. Imagine, if you will, playing Crysis on a netbook 8.9inch screen. lol
They have put a lot of thinking into this whole 'your just watching a video'. Meaning you can watch the best players play the game before you buy it, or watch real matches any time, in realtime. You can also rent games from them for a fee. The video showed them renting for 5 days, no word on cost. You can of course purchase the game forever, assuming you want the game, and again no word on cost. They have said that the OnLive is a pay-for subscription, meaning you have to pay $xx a month to just run OnLive, then if you want to play anything but a demo, you'll need to pony up again.
I know enough about math and computers to know that I don't know much, so when I was left curious about this new compression and decompression (compression is harder than decompression) that was 'unknown'. I am quite displeased by the lack of evidence of this algorithm. Also, I'm not sure how the servers would handle multiplayer from the same tv box... it was never addressed. Multiplayer worked across platforms, which is nice, and even has a 15 second record button. Whatever though, you never know your going to do something epic until you've already done it.
A friend of mine brought up the fact that if this really takes off, the big 3 would be sure to show their displeasure. How would they react? I don't know for sure, but I can't imagine they would take it lying down. (Note: Big 3+1 is Nintendo, Sony, Microsoft, PC. Since OnLive runs on servers, you could say that they are running on PC SDKs.)
They are holding betas, sign up if you want.
For more info, or to sign up for the beta, go to their site: OnLive.com