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Last year my friend and I were discussing how the future of games will be just streaming the games through high end computers and just paying for the service and this is the first step for that to happen.
Go ahead and laugh but one of the reasons blu-ray won't last is because of digital distribution and potential of services like these. It may not be good right now but wait until a few years. Hell, even Steam was a laughing stock when it first came out with half life 2
For me, OnLive looks like it will be a combo of PC/console digital downloads and GameFly. For my money, I'd much rather just own what I'm playing and have a backlog that I can see and feel good about.