Cloud computing is a popular phrase which is used for applications that are developed to be rich Internet applications (AJAXed - like Desktop Apps) that run on the Internet (or "cloud"). In the cloud computing paradigm, software that is traditionally installed on personal computers is shifted or extended to be accessible via the Internet. These "cloud applications" or "cloud apps" utilize massive data centers and powerful servers that host web applications and web services. They can be accessed by anyone with a suitable Internet connection and a standard web browser.
The architecture behind cloud computing is a massive network of "cloud servers" interconnected as if in a grid running in parallel, sometimes using the technique of virtualization to maximize computing power per server.
Google, the most visible example, took cloud computing a step further and directly challenged Microsoft by offering a suite of free word-processing and spreadsheet software over a browser.
Hundreds of companies in Silicon Valley are offering every imaginable service, from writing tools to elaborate dating and social networking systems, all of which require only a Web browser and each potentially undermining Microsoft’s desktop monopoly.
Microsoft is a late entrant to a set of businesses that are largely defined as Web 2.0, but the company is counting on its ability to exploit its vast installed base of more than one billion Windows-based personal computers.
The Windows Live service (MS Cloud Computing Initiative) — which is found at www.live.com — includes new versions of the company’s Hotmail and Messenger communications services as well as Internet storage components.