The way to think about it is like cable - instead of owning you get a whole bunch of options for a monthly fee.
In many ways this isn't bad. For one, if the service is a success then the games aren't going anywhere. For another, how often do you boot up most of your old games (we all have a few exceptions that we've taken with us for a half-dozen PCs.)
If the price is right it'll be interesting:
Say it's $60 a month, or the cost of one full game. If you buy a game a month anyway this is a good deal. In fact, it can be better than a good deal. Take that FPS you bought and only got 5-10 hours out of, maybe FEAR. You beat it in a week. With this you can move to the next game without paying more. Great win!
On the flip side, take that other game you bought, maybe Fallout 3 (but not for Jerykk.) You spent two months playing that game and just that game. Well, now it cost you $120.
So it'll be great for games you blow through, bad for ones that eat your life (RPGs and online games mostly.) It still might work out.
I'd be more interested in how they pay royalties. They have a lot of metrics to grab here, most interestingly they can monitor total hours played. Wouldn't it be impressive if publishers\developers got paid for each hour played? It'd give developers incentive to really design a game that you keep coming back to, either because it's so replayable (puzzles, strategies) or so deep, rich and long (RPGs.) Sid Meier, PopCap and Valve would be rolling in cash. Well, I guess they already are, but it'd be more tangible.
There'd be less incentive to create short, forgettable games, or maybe just more incentive to genericize them down so they get the widest reach...