[GDC 09] OnLive is a startup that aims to start "cloud gaming" - by that we mean have the server execute the game code, including the high-end graphics, then stream the (HD) video back to a much weaker gaming client. OnLive doesn't really explain how they avoid usual pitfalls like internet choke points, but they claim to have a great compression mojo and some secret sauce to make it all work.
If this works, it would effectively free client computers from having ultra high-end processors and graphics cards. Many companies have dreamed of this only to fail, but OnLive believes that they will be the first to make this work (at least for games where latency isn't such a big issue?). We'll take a look this week at the Game Developers Conference and we'll get back to you.