I think it will be the new way for computer gaming to go. As far as we all are concerned, it's all about money for game companies. Where PC is getting less and less attention, because of the consoles and the rapid technology that is provided for consoles those days.
We can always argue about which console is better, but facts now is that computer suffers because of the consoles and piracy. So they don't earn enough by developing it for computers, that is where I think OnLive will have the biggest benefits:
It erases the problem most computer developed games have at the moment, piracy.
For many people, they think getting a good computer costs money, this myth will be gone by having online servers since they can't get the games normal way there unless you hack the server and drain the info.
Snow_Fox: There is a system like this implanted in Norway, which have been some sort of talk where a ISP there provide servers with games on it. So far around 20,000 people use it everyday and they have no problem playing high end games like Crysis, COD MW2, CSS and those kind of games. The biggest problem though with those kind of systems is the internet you need to have. In that ISP's case, they have 3 different connections they sell.
1) 10 mbit in/out
2) 30 mbit in/out
3) 100 mbit in/out
Which shows that you need a quite good connection to make use of it and computer screen for that matter.
OnLive connection towards PS3/Xbox:
To be honest, I'm not sure if this is possible at the moment. While it also depends on Microsoft slightly as well, since if it will connect to one of the consoles, my bet would be Xbox Live. One of my reasons for that is the economical problems Sony have at the moment, where they can't afford to merge connections with a OnLive system.
But I do agree on the price system itself is way off and the users internet will need to have top notch connection to take adventage of online servers like this, but is it realistic? Yes, very so. Why? Quite many years ago, people and pc users alike said Consoles where dead with PS1 and N64. If look into it today, consoles is neck to neck with computers and that's why computer play need to envolve into something different.
Just my few cents.
Jeted-