I just realized something that has never been brought up before (or I've ever seen it brought up at least). If the cloud is ran off of a set number of servers (300,000 I believe). Then wouldn't that mean a set number of power, as the OP stated. So are you following me on this? If the xbox one's servers are only so powerful, and "you're really getting 3 xbox ones because of the cloud," wouldn't that mean that with every xbox one sold, every other system would get slightly less powerful?

I don't think it's about the bandwidth of the servers. In fact, I don't think it's a bandwidth question at all since if you want to use the cloud's power for computing, you'll probably be transferring rather small amounts of data. If I had to guess, I'd say it's more about lag. A lot of computing needs to happen in real time, and in those cases I doubt cloud can really help much.

That would imply that MS stops adding servers

Are they going to the power every time one is sold? How often will they be updated? That would make the power incredibly unpredictable, and impossible to develop for. 

Right now their servers handle roughly 15% of the internet traffic according to estimates I imagine they are going to need to keep adding servers to meet their business needs.

It's hella powerful, yo.

You are misunderstanding immensely what Cloud Computing is about. It is not about streaming HD movies or textures, or auto updates. That's Bandwidth and that has very little to do with _servers_. It's about Computation. Say it with me, Computation.

What it means is that complex tasks such as computing a massive world scene in a game, where computing where all the units will go and what they might do, can be offloaded from an individual console, so it can do other things, It means multiplayer games, not necessarily MMOs, which are notorious for needing lots of processing power, can be offloaded from an individual console, so it can do other things.

Remember, its not about streaming, its about computation.

If I seem a little peeved it's because I have seen SO many people get this wrong.

The article you are talking about might indeed be that the MS network has a theoretical max _transfer_ rate of 3 terrabits per second, which seems really really low. But just to give perspective. The current top Super Computer has a theoretical max _compute_ of 54,902.4 Tera Flop per second. Super computers are used to compute things like nuclear explosions physics and other shit.