It's way too early to comment specifically on OnLive. But what it represents is of great interest and concern to everyone. I hear "cloud" gaming is a popular topic of discussions at the GDC. Here are a few predictions of my own.
First, I doubt this heralds the end of consoles. It's possible, but I'd be surprised if consoles ever disappeared. It doesn't matter if nearly all the games are the same. It doesn't matter if they share essential hardware and software features. Competition can flourish on things such as brand loyalty, familiarity, aesthetics, and ease of use. Look at automobile competition. Look at the PC-vs-Mac.
Second, OnLive sounds good for PC gamers. The greatest barrier to consumers interested in PC games has always been compatibility issues. And the costliest issues for PC game developers are compatibility and (arguably) piracy. If OnLive works as they say it will, those problems are eliminated.
Third, this isn't the end of traditional PC gaming. Modding has become increasingly popular over the years, and a person can't modify a game unless he has access to the code. Also, many consumers will want hard copies of games so that they don't have to worry about a service changing, provider-publisher contracts, internet access interruptions, etc.
What do you think? Where is cloud gaming leading us?