Microsoft is preparing to enter the cloud gaming realm pioneered by services like OnLive and Gaikai, according to a report on Electronic Theatre, where they say the service will launch next year (thanks Computer and Video Games). This seems to explain recent indications that the upcoming Windows 8 will incorporate some sort of Xbox LIVE functionality, as word is: "Designed to incorporate the industry-leading online videogames platform Xbox LIVE into all of Microsoft’s devices and software – including Windows Phone 7 and the forthcoming Windows 8 OS (tentative title) – the portal would allow videogames to be delivered across all formats in unison. Microsoft Studios has already seen minor success with regards to these types of application thanks to the likes of Full House Poker, an Xbox LIVE Arcade and Windows Phone 7 title that has proven to be a fertile testing ground, though things may be taken much further in the coming year." Here's a bit more:

Microsoft Studios intends to launch Xbox 360 games across all formats, allowing players to purchase the game once and continue playing on any device. This functionality was revealed prior to the launch of Windows Phone 7 with a handful of simple Xbox LIVE Arcade style games, however now it seems that Microsoft Studios intend to take things even further. Having recently announced cloud storage for Xbox 360 gamers, it seems likely that Microsoft Studios will make available a game streaming service, allowing Xbox 360 games to be played on console, smartphone, tablet or PC.