Thanks for the info.

I still don't see how this will be feasible, even with stuff that's less latency dependent like lighting if the users' net connection is poor. If the connection lags then are we going to have issues similar to texture pop-in but for lighting/fog/fluid flow? Are these things going to suddenly appear in all their glory as we play?

As for the last part, perhaps MS will make it an optional extra for users with Gold subscription?

just some more info on what they want to offload from n article from datacenters

http://www.datacenterknowledge.com/archives/2013/05/24/microsoft-will-back-xbox-one-300000-servers/

"Booty says cloud assets will be used on “latency-insensitive computation” within games. “There are some things in a video game world that don’t necessarily need to be updated every frame or don’t change that much in reaction to what’s going on,” said Booty. “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.” This has implications for how games for the new platform are designed."

One of the things within the X1 is those dedicated hardware encode decode data movers.  MS  can offload encoding and decoding the process work sent to the cloud thus tackling the bandwidth issue.  This would not be any difference then how Gaikai does it magic but I believe you probably get greater compression.  Also the data received probably does not have to be game type assets but vertices or setup data of that sort.

there could be 2 different ways to pay for this which you can believe MS will be charging for.  XBL Gold subs will only able to use this extra processing to enhance their games or the developer/publisher will be billed something to use the cloud processing.

I think that MS, as usual, was deliberately vague, and that 3X XBone power available thanks to the cloud will be justifiable in some ways, that obviously cannot be the raw computing and graphics power. For example that offloaded computing and the statements quoted by nikosx could mean that the cloud will allow single player games to have larger worlds, like MMOGs, with their remote parts being active, managed in real time in their evolution and ready to be loaded as the player approaches them. I agree too that MS tech can't solve the lag problems and this will limit the viable applications of cloud, but strictly speaking they'll be able to say that in some contexts that 3X power can be considered true. Obviously, with enough local storage, a client machine, be it a PC or a console, can manage vast worlds of any size, but the parts of those worlds that can be kept active at any time are necessarily smaller and depend both on RAM available and CPU computing power, while GPU power limits, and will limit using cloud too, the part of world that will be visible at any time and with what detail, cloud can't change it as lag problems would be unacceptable. In some aspects the claim is obviously stretched, in others it can really extend the console's capabilities, although in ways not different from any other server based solution, except that the cloud can be implemented, and scaled up when needed, a lot more cheaply, and using a lerger number of small nodes spread around the world, lag will be lower than using few central servers. But lag will always limit the possible applications, this won't change even when internet connections get faster, their lag will still remain orders of magnitude higher than latency in communications between the internal components of any single client.

GI: "What XBox One lacks in RAM, it potentially makes up for in cloud computing." Talks about how the game will have unlimited dedicated servers for the game, offloading "a few dozen AI" and physics, says the game would be impossible without the cloud and wouldn't have attempted it. Still dealing with unfinished hardware and software, so it's "still a little rough going at times."

http://www.neogaf.com/forum/showthread.php?t=578141 has the game informer qoutes

so when the service goes down after the gen ends the game will play like a 3 year old designed it since it be impossible without the cloud lol.

possibly. I dont know yet. Doesn't really matter to most people. I dont know too many people who play games after the previous gen has ended and they moved on to the next. maybe hardcore gamers will. I just like my games to be as good as possible at the time that I play them, which is usually with in 2-3 years after release.