For those of you not aware, OnLive is cloud computing applied to gaming. Thus computers somewhere off distant (this will be important later) have the games loaded and do all the processing, whereas you send commands via the internet and receive images in return. The idea is high quality PC gaming without the cost or the mess.
I installed the program and got it running, which took a surprisingly short amount of time. The game library at the moment is rather small, but does have a few notable titles such as Assassin's Creed 2 and Borderlands, and obviously their intention is to widen this pool as much as possible. A lot of the games had a demo option (for a max of 1/2 hour) so I did that with the two aforementioned games, and it is from that roughly hour of gaming that I draw my following conclusions.
Positives
Computer doesn't matter. I was playing on my Mac, which first of all meant I was able to play games I otherwise couldn't (although Steam is trying to change that). Secondly, even if I was playing on a netbook, if I had had a good enough connection it would have functioned as well as a thousands-of-dollars gaming set-up. In addition, the computer didn't speed up, heat up, etc, and was processing like it was working on a high-def YouTube video. Games loaded quickly and looked great, and sound was about what I was expecting from what I could tell. The spectating and "brag clip" integration could be potentially nice if I had other friends on the service, but since I don't I didn't explore it much.
Negatives
Lag. Lag lag lag lag lag. On the FPS (Borderlands) every time I adjusted the view it jarred, almost making me a bit motion sick towards the end, although running and aiming weren't too bad. I have a fairly fast connection that in the past has never been the problem, so I have a hard time imagining it being better, and could definitely see it being a lot worse. Assassin's Creed 2 wasn't as bad, but it still felt a bit disjointed, more noticeable because I've been playing it on my 360. Although the lag was not nearly as bad as I was expecting, it would definitely make me question buying it.
Also, while in the future I would have have to pay for the service, I was surprised by the price of the game. You can, for most games, do "Play Passes" for 3 or 5 days for varying prices, or you can buy the complete game for retail price. First of all, if it's a paid service I don't like paying full price for a game I'd lose if I quit the service. Additionally, if I'm paying a base price I'd appreciate seeing some free games, even if they're older and not quite current-gen.
Lastly, although this is a very unrealistic wish, it would be nice if I bought a PC game, it had an option to play it through OnLive as an extra bonus, just so if you wanted to play your game when low on battery or on a different computer and didn't want to go through an install process, or something like that. I doubt I'll ever see that happen, but it would be nice.
Conclusion
OnLive has a lot of potential, and I could see it growing into something I'd be interested in given a few years, but as it stands right now they need to address the lag and library issues before I'd consider giving them more money. I'll definitely keep an eye out for it as it advances, though.
-HTMC
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