On Thursday, OnLive, a pioneering cloud-based gaming service available for the Mac and Windows, launched its long-anticipated stand-alone game system. OnLive’s new MicroConsole TV Adapter and wireless controller Game System expands the OnLive brand, effectively turning any television set into an instant, on-demand gaming device. The home console market is one of the fiercest industries to break into, but OnLive’s impressive price tag—$100, including a free game pass—and its strong array of titles may see it make a splash this holiday season.

For those who are unfamiliar with the OnLive name, OnLive is a cloud-based gaming service that lets you stream games to your Mac, Windows PC, and thanks to the new Game System—your TV as well. But OnLive’s biggest marketing problem is that the average consumer has no idea why it’s cool. I know this because trying to explain why it’s important to a room of technology enthusiasts (like, say, the Macworld editors) will only get blank stares.

So, a history lesson. A decade ago, few gamers would have dreamed that we could play high-end, graphically intensive titles without physically buying the discs and the box first. Then came pirating, as well as Steam and other game services that effectively allowed players to never have to leave their home to enjoy games. Game discs and box-art began to be phased out, being replaced by downloadable content. Earlier this year, OnLive proved that gamers don’t need discs, high-end machines, or even to download large game files in order to enjoy premier titles.

In a decade, we went from gamers having to go to stores, buying a specific console (usually around $300 to $600) or a gaming computer (costing at least $1000) and then the games they wanted to play (usually priced between $30 to $60) to where OnLive takes us now: using virtually any TV, Windows or Mac computer can be used as a gaming platform. While we’re not there yet, OnLive is exciting because it foretells a new future where gamers don’t need to shell out thousands of dollars on high-end machines or hundreds of dollars on specific consoles. OnLive can become the Netflix of gaming, and that’s why it’s so cool.

Since OnLive’s spring release, Mac and Windows users have been able to enjoy games like Batman: Arkham Asylum, Unreal Tournament, and Splinter Cell without game discs or massive downloads thanks to OnLive’s now free-downloadable service. The Game System, available for $100, brings the service to television and places it in more direct competition with home consoles like Xbox 360, Playstation 3, and the Nintendo Wii.

The home console market is infamously challenging with a very thin margin for error. A bungled console launch has doomed several great gaming developers but the larger and often more buy-happy console gaming market is extremely lucrative if you can make a name for yourself.

OnLive clearly understands the challenge and has done some very smart things. For the Game System launch, OnLive already has a following established through the Windows and Mac community that has been enjoying the service for months who can speak to the OnLive service actually working. OnLive has an impressive list of 35 titles and a list of “upcoming” titles that will hopefully launch simultaneously on the platform. Gamers can make informed decisions about what consoles to buy based on what games are going to be available—OnLive basically says right up front that it’s going to have the titles you want, including Assassin’s Creed: Brotherhood and Homefront.

OnLive’s engineers have clearly spent a lot of time developing its home console. The Game System is essentially two pieces with the first being a small black box about the size of a portable hard drive. Setting up this MicroConsole TV adapter requires only plugging in an ethernet cable from your router, an HDMI cable to your TV, and the power supply. Not only is it easy to set up, it’s plenty portable.

The other part of the game system is the Wireless Controller—its something OnLive got very, very right. It looks and plays like the offspring of a TV remote, the PS3 controller and the Xbox 360 controller. The controller features two joysticks, four buttons (X, A, Y, B) in the right corner, a specialized D-pad in the left corner, two triggers and your standard R1 and L1 buttons. It feels a bit heavier than the Xbox 360 controller, which I personally feel is more ergonomically comfortable than the PS3 controller, but I prefer the PS3 and OnLive controller’s dual stick design. Bottom line: the controller is familiar enough to gamers to be easy to pick up and play and still serves OnLive’s purposes. At the bottom of the controller is a thin line of five buttons like you’d see on a VCR or DVD player. These effectively allow you to record and play back your brag clips—it’s a clever, subtle and useful design quirk that doesn’t distract from gameplay.

Perhaps most important decision made about OnLive is its price. At $100, it undercuts the competition to such a degree that virtually any gamer has to pay attention to it. Not only do you get the controller and MicroConsole, but you also get a free game pass. That means you’re really paying $50 for the controller and console, and that’s a pretty damn good deal.

But how does it play? About as well as the OnLive service running on my MacBook Pro and Core i7 iMac. When doing my game reviews this week, I used a lab television and the MicroConsole exclusively and didn’t notice any slowdown in frame rates or gameplay differences compared to what I experienced when playing on my Macs.

This was also a lot of fun to test. You can record retroactive brag clips with a click of a controller button if you do something cool. You can go to the Arena and watch other players play and get some intel on how other players beat certain levels. You can then cheer, jeer, or friend them. It was easy to unlock a game and start playing and when done, switch to another game. Demoing is a breeze too—unlike other services, OnLive lets you actually play through the beginning stages of the actual game as part of the demo.

Macworld staffers were equally impressed with the graphics and lack of lag. I demoed Assassin’s Creed II and Borderlands for Senior Editor Jonathan Seff and Editorial Director Jason Snell and both were impressed by the frame rates and the look of the game. The 1080p video resolution was also a welcome surprise, as is OnLive's promise of 3D TV compatibility in the future. Hardcore gamers will also enjoy the fact that the console is BlueTooth and USB-headset compatible.

While I’m a huge fan of Steam, I have to admit the service is currently limited in its game selection on the Mac and the lack of simultaneous launches. Meanwhile, OnLive has already boasted several simultaneous launches of high-end games including Mafia II and Kane & Lynch 2. And while Steam requires you to download the game’s content to your hard drive, all of your game’s information is effectively stored off-site in one of OnLive’s servers.

That’s the good and bad news for some players. Some will miss feeling like they “own” the game, since they’re effectively unlocking the game on a service rather than downloading it to their own machine. But storing everything on the Cloud also means that OnLive will allow you to start playing Borderlands on your TV, save your game, and pick it up again on any machine that has the service—within seconds. Downloading OnLive’s client takes seconds, even compared to Steam’s and again there’s no game content that needs to be downloaded.

Of course, like OnLive, Steam games require Steam connectivity to work. And like Steam, OnLive is completely dependant on your Internet connection. The recommended minimum broadband speed is 5Mbps for 40-inch TVs and above, 4Mbps for 30- to 40-inch TVs, and 3Mbps for TVs less than 30 inches. Slower connections can experience nose-diving frame rates and there have been reports that people who live further from server locations and have worse connections will find the 1:1 action to be anything but. That said, I can only speak from my own experience, and that is that OnLive has worked as promised with some caveats.

At one point, my Borderlands game encountered an error and the service disconnected. Unfortunately, this occurred during a boss fight and when I re-launched the game, I had lost much of my progress. Games like Borderlands (review forthcoming) are especially prone to players losing their progress based on a checkpoint save system. If you don’t save constantly, a little network hiccup could spell doom for your game.

The other major drawback is that while OnLive is a social service, it's multiplayer component is hit or miss. Granted, games like Darksiders and Assassin’s Creed II aren’t meant for multiplayer. But in Kane & Lynch 2 and Borderlands, trying to “join” a multiplayer game will see you twiddling your thumbs for a while. With Borderlands, there aren't many public co-op games to join, and so multiplayer is dependent on inviting your OnLive friends for combat. After trying to join a quick match with Kane & Lynch 2 and being unsuccessful on multiple tries, I was worried that OnLive simply didn't have multiplayer capability. But jumping into a public match in Unreal Tournament III: Titan pack was easy and I was gunning down fools in seconds. That said, many future releases on OnLive are dependant on their multiplayer performance, and so far the public matchmaking services aren't there yet.

Macworld’s buying advice

Steve Perlman, OnLive's founder and CEO, boasts in the company's press release that, “The OnLive Game System marks the start of a new era for video games and home entertainment. Not only is the OnLive Game System the fastest, simplest way to play, watch and test-drive top-tier games instantly on the living room big screen, it also opens the door to a new world of options for gaming and entertainment—from media-rich social networking and massive spectating to game portability across TV, PC, Mac and mobile devices.”

While it's too soon to tell if OnLive's launch does signal the start of a new era, it is safe to say that Perlman has made good on several of the company's promises. Specifically, OnLive is fast, easy, and impressively simple to utilize and due to its low price, OnLive's Game System should appeal to a new group of potential console gamers. Its game selection is satisfactory and though not on par with the Xbox 360 or PS3's, in the future the gap could close thanks to OnLive's deals with several high-end publishers.

The portability across TV, Windows, and Mac is also really exciting as it ensures that Mac users will get to enjoy high-end titles they would previously never get to enjoy. When the multiplayer functionality is better flushed out with certain games, and as the game library grows, Perlman's boast of a new era becomes more and more likely.

[Chris Holt is a Macworld associate editor.]