onlive is an attack of the second hand market first and foremost, the mod community secondly, on all current forms of gaming (both PC and console), and finally and to a lesser extent and quite in the long term, on piracy.
For the curious:
http://www.pcper.com/article.php?aid=859
You pay 15$ a month for the "service"... then you have to buy each game for 60$ (console price, 10$+ more a game than the PC price). And you can NOT sell the game on the second hand market, it is tied to your account irrevocably... You never get anything physical either , so WHEN (not if) they go down or take down older games you lose them (at which point someone would buy the rights and be glad to sell you the same game again... under the same terms).
From what I have seen and heard so far of the closed beta there is:
1. Input lag which ruins competitiveness of skill based FPS games.
2. It plays crysis on MEDIUM quality settings, the kind you would get budget gaming card, not high end quality.
3. It plays all games at 720p resolution...
Frankly the whole thing is one big drek... but it is making industry execs salivate... just wait for onLive exclusive games. Like MMOs there would be no second hand market, no mods, and no piracy, and gamers pay more and get less.
A big target for them to kill is the modding community... things like the temple of elemental evil repair mod by Co8, the KOTOR / KOTOR2 restoration mods of various flavors, total conversions, etc... they breath life into old games you already own, giving you days or weeks of blissful playing, for free! That is time that you aren't spending playing (and thus buying) the newest out the door souless boring clone game (it is a clone of dozens of other games and has nothing new to it)...
Notice how the hulk, spiderman, batman, just cause 2, prototype, and infamous are pretty all the exact same game with slight differences?
Also, if they do replace all hardware purchases then there would be no real development... millions of customers fuels the development of new chips, that development allowed advancement elsewhere, with oil exploration, earthquate prediction, and 3d movies such as avatar ALL being entirely based on technology that was developed for the video game market initially. Don't expect any improvement, innovation, or quality... higher prices, no second hand market, and absolutely NO MODS!
What are my hopes for the onLive service? I hope it fails!
EDIT: I also forgot to mention... this would be terrible for small indie companies if it takes off, since there would no longer be a hardware base for them to run on... they would have to resort to paying into those distribution models like onlive, which judging by the RIAA's history would simply rape the small guys, with the distributer taking the greatest bulk of the profits (over 90% with the RIAA)