this is internet bandwidth dependent and it will never beat local HW.
still a good step into the future of new possibilities.

Not nearly as much as you think.

Think of it this way... When you die in Halo, the console has to make sure the spawn point in not within sight of anyone and is safe to respawn. When 10 people die in a span of 5 seconds this could be very CPU intensive. Having servers do this work and simply send instructions to a console saying "Spawn here" isn't bandwidth dependant at all. 

With internet becoming more readily available and faster cloud streaming, cloud storage and cloud computing could be the differentiator that consoles need to make 8-10 year gens more viable.

I know a lot of people are skeptical right now, but there are real world uses for this.

Note: I fully expect to see at least one more generation after this one.

There is a lot of potential in the concept no doubt. A wait-and-see situation I guess.

At least there is quite a big potential for nextgen-systems! This applies both to Sony and MS, of course. The solutions will be interesting to watch and discover.

So the developers create a full game that will work without internet connection. Then after that they go back and develop the game for an Xbox*4. This version adds visual integrity to the game and works like a torrent to add the pieces together. If the connection slows, the game can throttle down from Xbox One-Xbox*4. Interesting concept..

Would make for a pretty impressive chess game. I wonder if it could be used for procedural texture generation? Or a dynamic landscape so you never play the same level twice.

Impossible.

If the cloud provides more processing power, that would mean the game would look or play better when you're connected to the internet. That's not acceptable.

This will also increase the price of the Xbox or Gold, since MS will not just eat a loss on server hardware they're letting you use for free.

I am afraid this will be seen as the games are gimped if your not connected.

Cool idea but the masses might not see it that way

yes... but the article says lightning and cloth dynamics, and those aren't just find a spot in a map... those are heavy processing instructions that, yes, can be done in the remote server but the out put will not be small. but if theres a good internet connection, you can have those outputs in your memory in time to be used and displayed. still it will never be better than local HW. this points for sure to a subscription service to use these remote servers, much like the sony solution. Also, isn't this a method that can be applied latter even by nintendo in the wii U if they decide to go down this route? unless i am missing something HW wise that makes this only possible on Xbox One.