Does the water lag when you jump in it? It should be clearly visible if all the water calculations are done in the cloud. Jump in, delayed splash, cloud responsible. Jump in, instant splash, more bollocks.
Sending a mesh of the waves and ripples is a lot of data, It basically is an entire terrain mesh that needs to be updated in real time.
What I can believe is that is synchronizes the seed for the waves so all players have the same wave and weather pattern. That's nothing new, same as having synchronized day/night cycle in multiplayer games. Yet we don't go touting the cloud for doing the light calculations :)
And of course it needs to synchronize the wave pattern as how else can you fight other ships, they need to be at the same height on both consoles. Yet there are far simpler ways to do that than calculate wave physics in the cloud. Dumbest thing I've read in a while.
Isn't this all too complex? I don't see any reason at all to synchronize anything.
They way I'd do it is
a) Occasionally send a byte ("Weather condition") over the net that says "It's stormy", "It's dead sea", etc. Let each console handle the weather accordingly.
b) In combat, send a byte/word for each bullet shot ("Damage condition") from the attacker that says "This will miss", "This will hit around there with % damage". Let the victim act on this byte/word accordingly.
Particularly with b), lag isn't that big a problem at all. It also doesn't matter what each of the two ships in combat is actually doing on each console at the very moment of firing, the guy who fires calls the shots (in every sense of the word).