Interesting! Could you elaborate? Where do the frames come from?

I believe it's a server farm consisting of hundreds of "bladed" PS3s.

How does this work? Are the dvd images uploaded to Sony's servers? Do they have PS3 datacenters in several locations?

I have no first-hand knowledge, but it could be done like this…

1. Take a pile of PS3s, throw out the cases, and attach the motherboards to some custom-built rack arrays (these are the "blades")

2. Build one huge SAN that contains all the games, and tweak the PS3 BIOS's to read from the SAN as one huge internal HD. (BIOS tweak possibly not even necessary if the SAN was good enough at pretending to be a simple local drive)

3. Hook up the AV-out and the USB inputs to a series of XEON servers that simply pump out live h264 streams (and pump controller input back in) from the PS3 blades. One Xeon ought to support at least a dozen PS3s.

This is how it could be accomplished prior to Sony's acquisition of Gaikai and OnLive. Since then, they'd have access to Sony's own knowledge of the PS3 platform, and possibly make PS3 VMs that would cut the hardware blades out of the equation.

OnLive had five datacenters in North America, Gaikai ran on… 300? I imagine many of them were running virtualized Windows machines, as Gaikai and OnLive didn't start out as console streamers. http://www.engadget.com/2010/03/11/gaikai-will-be-fee-free-u...

The PS3 already support game streaming, you can play from your PSP and PS Vita, you doesn't need another server for the actual stream.

It doesn't play games you already own on discs (BD, not DVD in the case of PS3). It's a subscription service where you can buy/rent games that are stored on their servers. They are played on remote PS3s and streamed to your PS4/Vita.