Earlier computer networks have a central server that is connected to many computer terminals. These terminals serve mainly as input/output devices while the main computation and processing are done on the server. Then as personal computer became more and more powerful, many of these computation are done locally on the user's machine. Basically, the terminals in the network got smarter. Now we have more computing power in your cellphone than those servers back then.
With the rise of broadband and high-speed wireless connection like WiMAX, we now enter the era of cloud computing. In a way, it's back to basic where the server does most of the work and then deliver the result directly to the terminals on demand.
Companies like Gaikai, OnLive and OTOY are now capitalizing on this to make gaming more accessible for anyone. As long as your device can run their client, you can virtually play any game you want. The heavy workload and processor-intensive tasks are run on a server located somewhere else which then sends the audio/video output to your device.
Google is also trying to move everything we do on our PCs to the cloud. You can create documents, spreadsheets and presentations using Google Docs. All you need is a device that can run a web browser. Eventually, they want everything to live in the clouds.
This is all very exciting but I can't help to wonder what's next. Once everything we do is done and store in the cloud, what's the next big thing? Will we revert back to having smarter devices or something completely differently? Only time will tell us what's beyond the clouds.