Data centers and coverage - both MS and Google have a lot of them. As in crapload of them.
I can't remember exactly which one of those two, but I think it's Google's Project Stream that is calculating some things in advance to reduce latency - no idea how that actually works.
I've heard about the whole predicted AI too. I don't quite get this as a function for games. Are they really trying to advertise computers making moves for us before we have even decided it because they suspect that is what we will do?! So at that point a computer is playing the game for us.
Do you want The Matrix/Skynet? Because this is how you get it.
PSN:Forevercloud (looking for Soul Sacrifice Partners!!!)