To start off, a quick explanation of what OnLive is. It's an entirely cloud-based, server-side rendering solution for games, where all your computer is responsible for is displaying video, and taking your keyboard/controller commands and feeding it back to the server. There are two ways that games are rendered on OnLive's services: Natively, if the developer uses their APIs (which isn't too different from native Windows DirectX APIs, supposedly), and rendered on a console and fed through OnLive's video services. The former gives you better performance, the latter is slower.
So in essence, your computer is a thin client and doesn't have to be very fast, but your internet needs to be capable enough to support all that video coming down. Here's my home connection that I tested it on. Fast enough.
Fast, but fuzzy So what's the verdict? The response time is much better than I could have imagined. I barely noticed any lag between the time I hit a key and the time the Prince (of Persia fame) reacted to what I just ordered him to do. It felt natural, and I could easily see myself forgetting that all the hard work was being done in a server miles away and not two feet away from me. That is, if the graphics didn't take me out of it.
It's fuzzy. Muddy. Undefined. It feels like you're playing a PlayStation 2 game, rather than a current-generation game. Don't get me wrong though, the animations were super fluid, and motion felt just like it would feel if I was sitting down in front of an Xbox 360 and playing The Forgotten Sands in my living room. But because OnLive needs to stream all this visual quality to you over the internet, they need to make some sacrifices to the video quality in order for it to be playable.
But does it matter that the visual quality isn't quite up to par with native consoles and PC games? Not really—especially not when you consider that this can be played on miserable hardware that wouldn't even meet the minimum specs of the game you're playing.
Hardware The upside is, now both PCs and Macs can get these games delivered to them through the pipe without worrying about installation or hardware compatibility. Except for the input devices. OnLive only supports Xbox 360-compatible gamepads, and actually has a problem with Logitech mice on Macs. Most of these problems should be worked out over time, but check their gameplay support page if you want to be prepared.
Payment If you sign up now, you'll get the first year of "service" for free. But that's only one half of what you need to pay for. The other half is the game, which you can pay outright (Prince of Persia was $US50), or rent, which was talked about but isn't available for every game.
For example, Batman: Arkham Asylum offers 3 days for $US5 or 5 days for $US7, which is a steal if you just lock yourself in and finish the game in one marathon session. But you can't get an unlimited pass and "own" the game. Borderlands does have that, giving you a $US30 unlimited session, or 5 and 3 days for $US9 and $US6, respectively. You'll have to scope it out yourself to see what games are what.
Other cool stuff Because everything is just streamed from the servers to your computer, you can do quite a lot of cool things. We mentioned some of these in our hands on earlier this year, but stuff like playing console games on your iPhone, or spectating what your friends are playing in real time without increased demand on their connections sound pretty amazing to me.
A very tempting solution Provided your internet is fast enough and you can deal with the fact that the graphical quality isn't as good as it could be, this is quite a tempting offer. You gain the ability to able to play stuff on lousy hardware (and Macs!), spectate your friends and rent games instead of buy them, but lose a little bit of visual sheen. I think that's fair.