gafferongames.com/networking-for-game-programmers/what-every-programmer-needs-to-know-about-game-networking/
Look at the bit titled Client-Side Prediction. In this case it would be on the server but the same principal applies. And all you need to do is loop the previous input until you get new input from the client.
Again, you're talking out your ass. Client-side prediction is not "input prediction subroutines" and the server does not loop input anywhere. It looks like you found an article on your google adventures and hopes it vaguely agreed with you. That didn't work out so well, bummer.
Yes it will be slower by some number of ms but with a fast enough connection, it isn't too noticeable. I mean, its not like keyboard/mouse input data requires a lot of bandwidth. And that data only goes one way.
Bandwidth is (mostly) irrelevant. Anything beyond dial-up upload speeds would suffice. The problem here is that the commands have to leave the client terminal, arrive at a server, be processed, then rendered, then sent back to the client terminal.
Also remember that while your local based game can visually react nearly instantly it still has to send your input data to the server, have the server process it, then send any corrections on position and status back to the client.
No it doesn't, that isn't how localhost or server hosted multiplayer games work. You should probably read that article that you posted, you would learn a lot.
The only real difference with cloud gaming is that instead of sending status updates downstream, it sends a video stream.
Uhh, no.
In this case it would be on the server but the same principal applies. And all you need to do is loop the previous input until you get new input from the client.
I don't think you understand the concept of "client side".
Why do you say that?
Client-side prediction is used in client-side multiplayer games. It means that players each have their own instance of a game that predicts what impact the player's actions will have on the game and other players. The server only verifies player activity. This is how multiplayer games became playable and Quake became so popular. OnLive is a step backwards from this, it uses server-side processes to determine player actions.
This is also why on games like Call of Duty another player can shoot you in the face when on your screen the player was around the corner.