I think a lot of you are forgetting about how the internet works. You don't have a connection from your PC directly to the game server.
You connect to your ISP. Your ISP connects to their provider. They connect to the OnLive provider. The OnLive provider connects to the OnLive ISP. The OnLive ISP connects to their server.
Now depending on who you have for your ISP, and who OnLive use, there could be some serious traveling of data occuring.
Major providers have peering agreements with each other, but not all of them peer with the same people in the same place. For instance, my company in the UK has a net connection, and from us it goes to London. We have an office in Stockholm, and their connection is routed from there.
Unfortunately our provider only peers with the Swedish provider in New York. This means that our traffic goes from the office, to London, to New York, to Sweden. That's massive amounts of delay when I'm just trying to remote onto a server there.
Imagine how bad that's going to be if you're trying to play games!
If OnLive can get that sorted, then
maybe they have a slim chance of success.
BTW, anyone remember the Phantom? That promised much the same thing and disappeared in a cloud of burnt VC funding.
Edit
Quote: "a 5.0 mbps connection is required for HD (720p)"
So presumably that means that 1280x720 is the max res that games will run at? You're not likely to have access to the Options menu where you can monkey around with the various graphical effects available in the game either.
Quote: "OnLive is hoping that even if hardcore gamers stick with buying games as per usual and playing content locally on their own high-end rigs that its service will be a great place for trying out demos as you won't have to take time to download anything."
Really? How are they going to make any money? They don't seriously expect I'll pay them a monthly sub just so I can play demos? I'd rather wait the 30mins it takes to download a few hundred meg and play it for free.