Reality disappointed: What we actually got was a limited library of not-new games (Homefront, anyone?), many of which you already owned, but even laggier than on your own hardware. Turns out traditional retail, game publisher, and hardware platform companies made it difficult for cloud gaming services to get the best games on the day of release, and even then the gameplay quality was slightly inferior.

But the concept of gaming in the cloud is still an idea worth pursing for a far greater promise: the ability to deliver an entirely new kind of game experience.

Historically, in games as in any other media, new distribution technologies enable new creative experiences. Pong wouldn’t have been possible without a new device plugged in to your TV. Internet-connected computers meant you could play Duke Nukem and Quake with other people online. The evolution of server technology brought massively-multiplayer games. The iPhone brought Angry Birds, a game designed for a touch interface, and so forth.

So why should a cloud gaming service be used to deliver the same old games as before that were built for a $250 machine?

What we should be wondering, then, is what new kinds of games and gaming experiences cloud delivery could inspire? Compared to the gaming hardware you own, a cloud gaming service could access much more computing power—with a limitless capacity to add processing. Consider after all that the most powerful supercomputer in the world, the Titan, is about 70,000 times more powerful than an Xbox 360. Granted the Titan costs a cool $100 million, which cuts out most households, but scaling back to basic and accessible data center prices would still offer many orders of magnitude more computing power than any current or near-future home console . (And this isn’t to say great gaming experiences are limited to powerful hardware—to the contrary mobile phones play compelling games, too. They’re just of a different sort.)

As for content itself, games purpose-built for the cloud do not yet exist — ones that aren’t encumbered by the limits of processing power, that would use the full advantage of many more, and more powerful, CPUs and GPUs. These “supercomputer games” would open up creative possibilities far beyond what games of today are capable.

Imagine supercomputer games with vividly lifelike worlds and characters (and not the almost-real, uncanny valley of current-generation graphics), or a single battlefield with 50,000 other players playing at the same time — or opponent AI on the level of IBM’s Jeopardy!-winning Watson. Supercomputer games could be dramatically different from anything you can play tonight at home. I’m no game designer, but what if we could use real-time traffic data to fill the streets of the next Grand Theft Auto, or step into a computer-generated world that looks as compelling as the Lord of the Rings movies?

Now, there are many reasons, beyond the technological, that these games don’t yet exist: It would be prohibitively expensive to pay artists to create all those detailed graphics, and simple AI is good enough to defeat most any player at most any game. But the record of creative innovators is that eventually they find a way to stretch the available technology to its limit. And some gamemakers are already beginning to probe at the games you can create if you host some of the game in the cloud.

There is a nagging constraint to the cloud, of course — bandwidth, which simply isn’t growing at the pace of Moore’s law. Network latency makes fast-twitch games, in which defeat is determined in microseconds (like with the top console genre, first-person shooters) hard to play over today’s internet. So, at least until the next engineering breakthrough, these supercomputer games might be designed around genres requiring slower player reflexes than, say, Call of Duty or StarCraft.

Best of all, the only hardware you would need at home is a basic input device like a controller and a box to render the graphics, and it could be cross-platform so that you could play from a PC or Mac or any smartphone. As one for-instance, OUYA, the new open, Android-based console I back, could be great for a cloud-delivered game (hear me, developers?), and its notable that Sony bought up Gaikai and certainly has plans.  (Full disclosure:  OUYA also has an announced partnership with the relaunched OnLive.)

Supercomputer games could be extraordinary. Now some intrepid game developers just have to make one.

Roy Bahat is Chairman of the open, Android-based game console company OUYA, and is former president of IGN. He is also on the faculty at UC Berkeley. Follow him on Twitter @roybahat

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Sony announced the news early this morning, saying it was planning on building a cloud service that provided users with new gaming experiences. There were rumors in May that Sony was interested in working with Gaikai or its rival OnLive. Last month, Fortune reported that Gaikai was looking to sell for $500 million. Now that Sony has followed through and bought Gaikai, it raises some interesting questions about what its hardware future looks like.

Initially, the cloud service could quickly be integrated into the PlayStation 3, its successor the PS4 and the Vita, allowing users to access games without a download. Users could access, for example, older PS1 or PS2 titles from the console and the Vita handheld device. But the purchase of Gaikai could also alter Sony’s future hardware plans, putting less emphasis on powerful systems and more focus on a cloud platform that could bring PlayStation games to a wide array of devices. It could be Sony’s equivalent of “TV Everywhere”: Gaikai could connect to Sony smartphones and other mobile devices including tablets, and it could power gaming for a lot of TV makers.

Gaikai already has deals to bring gaming to TVs from Samsung and LG. It’s unclear how those deals will work now that Gaikai is owned by a rival. We’ll have to wait for more details from Sony and Gaikai, but the potential exists for Sony to depend less on big consoles and all the costs those incur. Having Gaikai means that the PS4 and the Vita would not have to be followed so closely — if ever — by another piece of console hardware.

That would be a big shift for Sony, which has traditionally invested in some of the most advanced gaming systems. The PlayStation 3, for example, was incredibly robust with its Cell Processor but the high specs came with $600 price tag and also took longer to hit the market. That ultimately hurt sales and forced Sony to play catch up against Microsoft’s earlier-to-market Xbox 360. Now, Sony can start to contemplate a future in which it doesn’t get hung up on those issues. Users could play the latest games from Sony’s data center with the titles streamed instantly to users. That’s the promise of cloud computing in which most of the heavy lifting happens in a data center.

The deal will no doubt heat up speculation about OnLive, which is also rumored to be an acquisition target. Gaikai had raised $45 million from Benchmark Capital,  TriplePoint Capital, Rustic Canyon Partners, Limelight Networks, Qualcomm Ventures , NEA and Intel Capital.

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In addition to all that existing gaming goodness, it looks like you might very soon be able to play a whole host of your favorite PC games on the platform, too. Not natively, of course (though ports of classics seems to be the thing to do these days), but via game streaming service Gaikai, which, much like OnLive before it, aims to remove the steep hardware barriers associated with many advanced video games.

Gaikai was shown running on an iPad (on Touch Arcade), and playing World of Warcraft on the device. Whether it’s a good thing to put WoW in the hands of addicts wherever they happen to go is another question entirely, but the promise of PC games running untethered on a device in your lap is intriguing indeed. I’m not a WoW player myself, but Starcraft II is landing late this July, and I somehow doubt it’ll be accompanied by a native iPhone port at the same time.

But will the gatekeepers at Apple allow Gaikai to invade its playground? The move could potentially have serious consequences on the App Store’s economics, since conceivably, Gaikai could stream any game to the iPad and other Apple devices, not just ones sanctioned by the Mac maker. Gaikai’s Dave Perry says Apple basically can’t block the service.

The reason being, Gaikai is HTML5-based technology. That means that its browser-based player will work fine on mobile Safari out of the box, unless Apple goes out of its way to shut down access to Gaikai specifically, which would fly in the face of certain recent correspondence by Steve Jobs himself regarding the closed nature of Flash versus the open nature of HTML5.

Gaikai shows the way to sidestepping iCensorship altogether, at least in terms of streamable web content. At this stage in the game, Apple has basically painted itself into a corner wherein it has to condone anything done using the HTML5 standard, versus rich media that uses browser-based plugins like Flash and Silverlight. It won’t work for all apps (like the one that allows you to sync wirelessly, for instance), but it should allow content providers to publish whatever kind of iPad and iPhone-targeted material they want without blocking fears.

We’ll see the Gaikai North American beta launch in the comings weeks, and then we’ll find out just how much openness Apple can tolerate. Hopefully it’s just enough to see me playing Civilization 5 on my iPad this fall.