In 2015, claims the document, Microsoft plans to shift focus to cloud gaming -- a move that could signal the next Xbox (or a smaller set top box afterward) as the final hardware product from the group, as the document says consumers will "never need to upgrade hardware again."
That's definitely an advantage. It's like what what OnLive does now: You basically see a stream of a game being run on a PC in some place rather than on your own console hardware. The advantage is that it can run all games regardless of graphics quality, as the machine itself only needs the power to stream. You could even have previously PC exclusive titles on there if they can be played with a controller. But then there are some issues...
The first disadvantage is the fact that you need to be online all the time, which is a big nono. It probably takes up a lot of bandwidth too, and there's the issue of input lag. Lag could be even worse in a multiplayer game, where the server itself has additional lag on top of the stream lag.
Additionally, even though the graphics can be set to max on a cloud PC, it still shows you a compressed video stream on your screen so the quality isn't the greatest. And internet connections aren't that great yet everywhere, so I imagine that 1080p streaming is out of the question for many people. And 720p with compression artifacts and minor lag in single player is more of a step down than a step up from the current console generation.
Finally there's the issue of not really 'owning' your game since it's up in the cloud.
So I'm on the fence about this. I think it's not really worth trying until internet speeds everywhere are much higher, and even then there are all the other disadvantages.