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OnLive is a cloud computing solution for gaming. It offers streaming of high-end games to any pc, regardless of its hardware. I wonder how it works: sending raw HD res image and audio data seems unlikely. Would relatively simple compression, like jpeg and mp3/ogg, do the trick?

+1  A: 

Have you read this article? Excerpts thereof:

It's essentially the gaming version of cloud computing - everything is computed, rendered and housed online. In its simplest description, your controller inputs are uploaded, a high-end server takes your inputs and plays the game, and then a video stream of the output is sent back to your computer. Think of it as something like Youtube or Hulu for games.

The service works with pretty much any Windows or Mac machine as a small browser plug-in. Optionally, you will also be able to purchase a small device, called the OnLive MicroConsole, that you can hook directly into your TV via HDMI, though if your computer supports video output to your TV, you can just do it that way instead. Of course, you can also just play on your computer's display if you don't want to pipe it out to your living room set.

[...]

OnLive has worked diligently to overcome lag issues. The first step in this was creating a video compression algorithm that was as quick as possible.

dirkgently
A: 

This is what I understood: It is a thin client based gaming solution. Different from the gaming consoles like Wii, X-Box or Play Station, no CPU/GPU or any processing is needed at player’s side. The game is streamed from a monster server via internet, just like a HiFi terminal session (RDP/Remote Desktop) but with HD graphics. Controls (inputs) are sent to the server and graphics is sent back. It can be played on Mac or PC via a web browser add-in or in a TV with a small unit to connect to the server. Requires a 5mbps connection for HD and a 1.5mbps for SD. Almost all game titles will be available or ported to this platform. No need to buy a console or a game. No need of high end gaming PCs… Just a broadband connection (of course this should be high end).

Read more on this on my blog here

Faiz
A: 

It's basically games-over-VNC. Obviously they use video compression; of what sort I'm not sure. The two obvious alternatives would seem to be something fairly computationally lightweight, such as motion JPEG or even MPEG 2, running on the same server that's running the game, or something more computationally intensive but compact, such as H264, running on dedicated hardware.

Personally, If I were designing the service, I'd go for the latter: It allows you to have better compression without massively upgrading all your servers, for the cost of a relatively inexpensive codec chip. Because the video stream is smaller, you can attract people who have connections that would have been marginal or too slow using a poorer codec.

Nick Johnson
According to http://i.gizmodo.com/5184502/onlive-streaming-games-hands+on-impressions a casual video codec seems to be an anctual solution. I've been wondering if they designed a special algorithm with vidogames in mind but apparently they did it the old-fashioned way ;).
Pyetras