OnLive is a gaming on-demand cloud-based service that’s able to stream video game titles from massive servers around the U.S. straight into your home.  Man is that a packed sentence.  Let me break it down for you.  OnLive has three data centers in the country (east coast, central, and west coast) that house large servers; these servers act as hosts to a bunch of video games.  If you sign up for the OnLive service and become a member of the community, the servers will pump video game content from the data center nearest you to your Internet-enabled PC or Mac.  Again, it’s essentially gaming on-demand.  After installing a plugin in your browser, you can launch OnLive and gain access to a growing library of video game titles.  It’s that simple, really.

The OnLive interface is neat.  There’s a game marketplace that allows you to choose from a wide selection of games.  With a single click you can play a game; or you can find out more about the game before you dive in by watching game previews & trailers.  You can even watch other OnLive members play the selected game in real time.  The interface drags you into the action of other players, and this is a great way to get a glimpse of a game’s visuals and game style.  Besides strictly being there for on-demand gaming, the service hopes to form a community of gamers with features like profiles, friends lists, and brag clips (you can record gameplay and share these moments with other OnLive members).

What’s most exciting about the OnLive service is that it does away with the need for over-the-top and expensive hardware requirements for games.  Crysis, a game that is known to be hardware intensive, will play smoothly and look great playing off an old Macbook or PC laptop.  The secret formula is OnLive’s proprietary video compression chips that pump out the games from the servers over the Internet and to your computer.  As long as you have a 4-5 Mbps Internet connection you will have no problem playing what used to be hardware intensive games in HD (a 1.5 Mbps connection is recommended for SD quality).  I really want to hit this point home as well: Since this is gaming on-demand, the service brings together games from all major game consoles (Xbox, PlayStation, PC) and enables you to play them right on your PC or Mac.  No need for proprietary hardware and cables.  All you need is an Internet connection, a computer, and a keyboard and/or Xbox-type USB controller.

There’s gotta be some lag, you’re thinking to yourself.  I was skeptical at first, too.  But I gotta say, after playing Just Cause 2 off an old Macbook over the OnLive service, I did not notice the slightest bit of latency between my controller button-mashing and the on-screen action.  It truly felt as if I was playing the game locally off a computer or video games console.  And what’s fascinating is that Just Cause 2 was running off a server more than 500 miles away in Santa Clara!  Though there likely is some latency if you want to get all technical, I honestly did not pick up on it during my brief session of gameplay.  I was told that as long as you are within a 1000 mile radius of an OnLive data center you should not experience noticeable latency.

Now let’s talk pricing and availability.  OnLive is available to use today (in fact it was turned on a day after my interview took place).  You sign up for the service at their website.  The “OnLive Founding Members Program” is backed by AT&T and it offers the first year of use for free (!), followed by a $4.95/month fee for the second year.  There’s no contract requirement which means if there’s a month you don’t feel like using the service just don’t for it that month.  Right now it looks like the company is slowly opening the gates to the OnLive community; if you want to sign up to play you have to sit on a waiting list.  Bummer, I know, but the service is still in its infancy and I’m sure the company does not want to overload its servers this early in the game.

And what about software partners?  You will not be disappointed on this front.  Just announced was partnerships with Sega, Capcom, Konami, and Square Enix.  Popular publishers like EA, Ubisoft, THQ, Warner Bros. Interactive, and Disney Interactive are also bringing their titles to the service as well.  I’m told new publishers are jumping on the OnLive bandwagon all the time, and this is great news for gamers.

Beside the addition of developer support, OnLive will be adding their MicroConsole to the mix later this year.  Basically it’s a small (and I’m told inexpensive) piece of hardware that will allow members to play the streaming games on their HDTVs.  It will support up to four wireless controllers, multiple Bluetooth headsets, and it packs two USB ports for wired controllers and keyboards.

Is OnLive the future of gaming?  Though it’s too early to tell, you can definitely see the potential it brings to the table.  With OnLive there’s no need for high-end graphics cards and to run to a store to purchase a game disc.  No longer do you have to worry about upgrading hardware to play the latest and greatest games.  If you’ve got the proper Internet connection and live within range of a data center, you are golden.  I’ve experience it with my own two eyes and thumbs–the latency was non-existent on the show floor.  Though my skepticism has been lowered down a notch, I’m still going to wait for a final verdict after I give the service a try on my own computer at home.  Even if OnLive doesn’t catch on and become widely popular, replace game consoles and eliminate the graphics cards arms race, you can bet everyone from industry leaders to gamers will turn to this service as an example of how the next phase of video game distribution was imagined and first put into place.