HTC invests $40M in OnLive (opens in new tab)

Latency is not actually the largest problem you encounter when setting up a system like this. Now, OnLive has the problem doubled due to their generally terrible datacenter model (a few very large datacenters), since this increases the average distance between customers and the server. But raw latency still not the most difficult problem to solve. A low-latency target does make a lot of already-existing problems worse, however.

(Disclosure: I work for Gaikai. Ask me anything and I'll try to answer.)

Me neither, all the coverage I have seen (and I haven't been following too closely I have to admit) has pointed to some magical prediction algorithm they've supposedly developed and having very local servers. Given on a great day I get a 30ms ping to servers in my city this would mean at best there is a 60ms delay between me hitting fire and seeing the result. Given that[1] is below the 24fps threshold you need to have to perceive smooth motion I expect you will be able to perceive the delays.

Perhaps they can colocate their servers with ISPs or telco exchanges or something but will that be enough and can that truely scale given the consistent hardware upgrade requirements they're going to have?

[1] 1000ms/60ms = 16.7fps

I've actually downloaded and played some trials (Batman and Splinter Cell). It runs amazingly well.

you can google search the article title and click in from there to access the whole thing :)