So, you send intput data (movement, etc.) to the serwer, witch is actually the machine running that game and its sends ya an personalized video-angle of the there rendered happenings. Well, they surely can use a ton of tech (i just use an in-mind image of those weather super-PCs), on a server-based architecture. Ture is, only intput data from controllers/keyboard-mouse goes then to the server, but a video-stream coming back the other way ...
... may not be bad if it handles a LOT of players on the server and stream has a good connection to the users. But i kinda cant imagine Modding or any personalization outside the "Server-box". Also, they need than another machine like that just for developers to try n test new content/games (if some lightweight PC version software for this purpose doesnt come out for them). .... i guess, Japan (or online game types like WoW) odesnt mind that much doe.