Newly launched company OnLive was quite the draw at the Game Developer’s Conference–and for good reason.

The company revealed at the conference a new technology that could reshape the future of video gaming.

The OnLive MicroConsole essentially allows for cloud computed gaming. Instead of playing a game directly off the console, any inputs will go through OnLive’s servers and will then be streamed back instantly on the monitor or TV.

In this way, people can play high-requirement games on lower-end computers.

“With OnLive we’ve cleared the last remaining hurdle for the video games industry: effective online distribution. By putting the value back into the games themselves and removing the reliance on expensive, short-lived hardware, we are dramatically shifting the economics of the industry,”  OnLive founder and CEO Steve Perlman said in a statement.

And OnLive doesn’t seem like another one of those good ideas that end up dying (like the Phantom). It already sees support from big names such as EA, Ubisoft, Take-Two, THQ, Epic Games, and Atari.

The company will also be launching its OnLive Game Service, a bid to support a game community like Xbox Live and PSN–communities that have helped the respective consoles flourish.

The console itself is small as well. In fact, it’s not really a console. It’s simply a hub to connect the gamer to OnLive’s servers. The device sports an Ethernet jack, a couple of USB slots, and jacks for optical or HDMI connections.

It’s all a little mind-boggling, though what was shown at GDC was impressive. There was no lag, and everything looked and ran nicely. OnLive is currently in closed internal beta, though it hopes to go into open beta by summer and launch by the end of the year at a competitive price.

If, when the device launches, the servers can still retain the lag-free instant-stream gameplay, then OnLive will have successfully redefined the video game industry. PC gamers will no longer have to spend thousands of dollars in order to play a game at maximum settings–they can simply stream it onto their screen. And there’s great potential for OnLive to be a serious contender in the console arena as well.

At the end of the year, Microsoft, Nintendo, and Sony may find themselves double-timing it to come up with something to stay in the game.