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I think this thing is pretty cool. You can have it on your computer or off, and a bunch of the biggest names in gaming have already signed on for it.
This service will stream not download, games to your tv so you can play them pretty much instantaneously in HD. This will obviously require a high speed internet connection and a subscription service that will most likely be a little more than XBL's.
You can fully buy or just rent pretty much any game, that normally would be on PC or PS3 or 360 maybe even WII and they will all be on the same 'console'.
The games are probably linked to your account and you access them using OnLive's servers that are supposed to be super ultra fucking fast that way you never have to wait for download times and shit. I am somewhat interested in this shit.