I think anyone with any sense can tell it was just PR talk.  What's more interesting to me is that he basically confirmed the rumors concerning specs.  "The cloud functionality is pushed as a marketing tool to compensate for the less favorable hardware specs."

oh shit!.. Day fracking one! pre-ordered.

Cloud won't help anything for games... forget that guys.

Or maybe people can hold an opinion that is more nuanced than "good!" or "bad!"  :P

One needs to exhibit some foresight and imagination, then consider what the scope for this will be in 5 to 10 years. It is possible that cloud backend will evolve game design in exciting new ways and in no way is the facility a negative.

Using all my foresight and imagination....... nope don't see it. 

Even if as you say the cloud improves over time and no doubt it will, it will always be a poor man's replacement for superior physical hardware specs.

To get an idea of what I'm talking about just look at how much computing power has advanced over the last decade and than compare internet infrastructure improvement over the same period. Going forward the difference will only increase making it even less suitable.

Having said that the cloud is perfectly fine for background tasks. The problem is that Microsoft keeps touting the power of the cloud and they deserve to receive all the negativity in the world as long as they insist on misleading its consumers.

Everyone with knowledge about computing can judge where the cloud can be an advantage for gaming and where not. The cloud isn't useful for low-latency tasks, so it won't for example improve the visuals very much. But for certain tasks where latency is of minor concern, it can be helpful. It's just that first of all I don't believe this feature will in practice be very used very much, because using the cloud will cost the developers additional money, while most gamers will hardly even realize the difference.

As soon as you think about what Microsoft is actually doing, you realize that in practise it's actually hardly more than a very clever marketing spin: They're communicating something that would usually appear like a disadvantage (reducing costs) as a tremendous advantage for the customer.

Ask yourself: What is Microsoft actually doing? Currently, they have 15000 dedicated Xbox Live servers. Running these 15000 dedicated servers costs Microsoft quite a lot of money. On the other hand, Microsoft also already has 300000 Windows Azure servers that have lots of remaining capacity. So from Microsoft's point of view, they're simply moving Xbox Live from dedicated servers to the underutilized Windows Azure servers and save the money for running 15000 dedicated XBL servers.

It will only be substantially implemented in games that require a persistent highspeed internet connection to play. So MMO's and online multiplayer games.

Unless MS only sells consoles in markets with decent and reliable high speed broadband I don;t know that this feature will become a core part of processing any time soon. I think it will be a few decades before all countries will have substantial broadband coverage at relatively low cost. And it's only when [almost] all countries have good coverage and low cost that cloud processing can really become and integral part of the way most games are processed.

What I would like to know is how much console hardware can be freed up if high latency processing can be delivered to the cloud. How much processing capacity in a console, at any given time, it taken up by processes that have sufficient latency as to be able to be seamlessly handled in the cloud? Is it 5%, 10%, 50%, 80%? If 80% of processes are high latency then the cloud could maybe make a console operate like a machine that's 4x more powerful. But if it's only 5% then that doesn't lead to all that much of an apparent improvement.

Like all tech cloud processing will improve with time, and someone's got to take the first step in commercial implementation.

Will this be a case of the early bird gets the worm, or will it be the second mouse who gets the cheese?

I do not like when companies lie to customers