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"Things that I would call latency-sensitive would be reactions to animations in a shooter, reactions to hits and shots in a racing game, reactions to collisions," Booty told Ars. "Those things you need to have happen immediately and on frame and in sync with your controller. There are some things in a video game world, though, that don't necessarily need to be updated every frame or don't change that much in reaction to what's going on."

"One example of that might be lighting," he continued. "Let’s say you’re looking at a forest scene and you need to calculate the light coming through the trees, or you’re going through a battlefield and have very dense volumetric fog that’s hugging the terrain. Those things often involve some complicated up-front calculations when you enter that world, but they don’t necessarily have to be updated every frame. Those are perfect candidates for the console to offload that to the cloud—the cloud can do the heavy lifting, because you’ve got the ability to throw multiple devices at the problem in the cloud."

Booty added that things like physics modeling, fluid dynamics, and cloth motion were all prime examples of effects that require a lot of up-front computation that could be handled in the cloud without adding any lag to the actual gameplay. And the server resources Microsoft is putting toward these calculations will be much greater than a local Xbox One could handle on its own. "A rule of thumb we like to use is that [for] every Xbox One available in your living room we’ll have three of those devices in the cloud available," he said.

Source: http://arstechnica.com/gaming/2013/05/how-the-xbox-one-draws-more-processing-power-from-cloud-computing/

The one thing I don't get is how will MS make profit from this? Cloud ressources cost a lot of money.