> Only a company the size of Google could come up with such a stupid idea.
Eh? It's the same idea as has previously been implemented separately by OnLive, Sony and nVidea. The idea is sound, but there were technical hurdles preventing a great user experience, technical hurdles that Google seems confident it can mitigate.
Google's architecture isn't fixed like a games console - their system is designed so that multiple GPUs can be used to render a single instance of a game, allowing, for example, someone to pay a bit more for greater fidelity graphics.
It's worth noting that a lot of console games today are dependant upon 'a long piece of wet string' in that they are multiplayer across the internet, typically with one player's console acting as a host to coordinate the game. For this reason it may be that there's less lag (with regards Bob's bullet hitting Alice's helmet) in a streamed game than in a traditional console online shooter.