What is the Cloud?
Internet Marketing Dictionary | Cloud Computing

The cloud is a term used to describe computer services that are delivered via the Internet that take the place of specific physical hardware and locally installed software. For example, people now store documents online via services such as Google Docs or use computing power supplied by Amazon's Web Services and the associated Elastic Compute Cloud service.

In these cases computer time and data storage facilities are accessed over the Internet and users don't need to know where the hardware that does the data processing is. Nor in many cases do they need to be concerned with the computing hardware that is used to deliver these services.  They also don't need to think about installing software to work with the data. Google Docs for example lets you create, edit and share documents, spreadsheets, presentations and other services from wherever you can get Internet access yet you don't need any word processing or spreadsheet software to use it.

Amazon's Elastic Cloud service ("Amazon EC2") focuses more on delivering high power computing facilities. Some websites also use Amazon's Web Services to host and deliver streaming video. The flexible nature of these Cloud computing services is such that users effectively rent the computing power they need when they need it. This means that they only pay for what they need yet can essentially share the overheads associated with running large data centers.

Cloud Computing is likely to grow in future as internet bandwidth speeds up making the process of transmitting data to and from data centers fast. Another factor that will boost cloud computing is the increasing ease of use of these services.