Everything You Need to Know about OnLive -- Is this Your Next Gaming Console?
After seven years of stealth development at Rearden Labs (a startup incubator), OnLive today unveiled itself as a new game service to deliver on-demand games. Basically, instead of running your games on a PC or console at home, you connect your HDTV to a small MicroConsole which receives compressed video from a remote server that actually renders and processes your games. The immediate benefits of the service is its low entry cost, since you don't have to build a high-end gaming PC or invest $500 on a next-gen gaming console. Games purchased with OnLive are activated on remote servers and the only data that is streamed to you is gameplay video and audio. You never have to download software, patches, or handle physical media. Think of it as video-on-demand but for games.
We met with OnLive's founders at Rearden Labs last week to get a sneak preview of the service, try out some games, and grill the developers about how OnLive actually works.

Serious Hardware and Software Mojo Within
Streaming video from Youtube takes seconds to buffer, and that's for low-resolution clips. How can OnLive stream gameplay that's rendered in real-time without any delay? Their secret sauce is a new video compression techology that they call "Interactive Video Compression". Cutting-edge data servers farms utilize massive parallel processing to reduce gameplay video into a proprietary compression format that integrates the randomness of the existing internet broadband architecture into the codec. Steve Perlman, the founder of OnLive, used to work at Apple, and helped develop the first versions of Quicktime, so he has a long experience with video codec and compression.
This isn't a technology that is easily duplicated, either. OnLive has filed over 100 patents to protect their tech, which uses both custom-brewed hardware (Nvidia has been a development partner) and software.
OnLive is Actually PC Gaming (For Now)

Even though OnLive calls its hardware a MicroConsole and uses a game controller that looks like a hybrid of the PlayStation 3 and Xbox 360 gamepads, the physical hardware that's running OnLive games is 100% PCs, meaning that the games run in Windows. That's why the 16+ titles being shown on the system are all PC games, including Mirror's Edge, GRID, Company of Heroes, and Lego Batman.
The actual PC hardware is a little more than what you'd find on your typical gamer's desk, though. OnLive data centers run a variety of enterprise-level servers with varying system configurations. Some servers may be more processor intensive while others have multiple GPUs -- the top end rigs in the current OnLive server hive utilize dual Nvidia 8800 GTX cards to give you playable framerates on graphics-intensive games like Crysis.
Depending on what game you select to play, OnLive will pick a server that meets a "framerate boundary" requirement they've attributed for that game. Extensive testing on their end lets them know what server hardware is required for each game, and you OnLive has promised to upgrade their server hardware regularly to keep up with the maximum spec requirements of upcoming next-gen titles.
Your personal game files, game state, and OnLive profile is kept on 16-drive RAID arrays, so loading games is much faster with OnLive than at home. In our test of the service, we loaded up a Crysis multiplayer map in under 5 seconds, and blazed from the main menu to a playable game of GRID in less than 30 seconds. OnLive is making a big deal about its ability to upgrade hardware at no cost to you, but we think having insanely fast load times is going to be one of the service's best features. In fact, OnLive founder and CEO Steve Perlman told us that one of his personal goals is to one day eliminate the loading screen completely from gamers' lives.
But the thing we find most interesting about OnLive is that this is actually PC gaming masking itself as a console platform. While it's true that Xbox 360 and PS3 compatibility will eventually come to the service, the games they're demoing right now are all PC games. If OnLive really takes off, game publishers are going to find more incentive to develop high quality PC games without worrying about minimum spec, hardware compatibility, and piracy. It's possible that OnLive will emerge to be the salvation of PC gaming -- a notion that we find fairly exciting.
OnLive Requires a 1.5Mbit Broadband Connection

You don't need fancy a gaming PC or expensive console to use OnLive, but the service does have one big technical requirement: your house must be equipped with broadband service. At the bare minimum, you must have a 1.5Mbit/sec internet connection to play OnLive games at SDTV resolution (720x480 widescreen) and at least 5Mbit/sec of bandwidth for HDTV gaming at 720p (1280x720). OnLive estimates that 71% of households in the US meet the minimum requirements for the service, while 26% are capable of the HD service (more if you just look at the gaming population).
Before signing up for OnLive, you'll be required to test your throughput and latency to OnLive servers to ensure that you're qualified for the service. Keep in mind that since gaming with OnLive using lots of bandwidth, you will have to throttle back your downloads and bittorrent traffic when using it.