While high-powered, high-price consoles like the PlayStation 3 languish on shelves, Rearden Studios thinks it has a new way to put cutting-edge graphics in the living room of gamers without the expense and hassle: just strip out all the system’s guts. The pocket-sized OnLive Games on Demand device, announced at this year’s Game Developers Conference, has no powerful graphics processor, massive hard drive, or even game discs – everything you need to play comes on demand over a broadband Internet connection.

While a traditional console needs heavy loads of processor power to render all the on-screen action in a game in real-time as you play, the OnLive box will simply send all the player inputs out to its far-away servers, generate all the graphics on the fly, and send them back across the Internet in an extremely compressed form. And according to the company, the entire process will happen in milliseconds, feeling exactly to the player as if it were all being done by the more typical humming box under the TV.

In short, it’s cloud computing for gamers. And rather than running out to the local box store whenever a new game comes out, you’ll be able to fire it up the second it launches. Hypothetically, gamers won’t even need to update their boxes when graphics technology gets better and better – all the upgrades will be on the company’s end. Rearden also claims that the PC-based version of its service will allow even old PCs to play the latest games, since they only need enough power to uncompress the frames OnLive sends across a broadband connection.

The system has been in quiet development for seven years, and Rearden has partnered with many major game companies including EA, Ubisoft, THQ and Epic, to deliver their games across the platform. That means titles like Burnout Paradise, Crysis Warhead, Unreal Tournament 3, Prince of Persia and BioShock will all be available when the service launches this winter. The all-important price, though, has not yet been announced. More information, and a sign up for the beta test, can be found at OnLive’s Web site.

OnLive MicroConsole