The Internet gaming service OnLive now has a tiny console that lets you play video games anywhere.

One night last week I started up a game of Shaun White Skateboarding on my favorite new gaming console. It was getting late, though, and I had to catch a plane in the morning, so I didn't play for long. The next day, I threw the console and controller in my backpack, dashed through airport security, and flew halfway across the country. When I got to my hotel, I plugged the game console into the hotel's TV and Internet line. Shaun White Skateboarding started up right where I'd left off the night before. A little while later, I found myself in a coffee shop with pretty good Wi-Fi, so I pulled out my Macbook—and there, again, I started up Shaun White Skateboarding from where I'd stopped.

Which game system was I using? How did I manage to stuff the entire console into my backpack, get it past the TSA without incurring an up-in-my-junk pat-down, and somehow sync my game to my laptop, too?  

It's not magic. It's the Internet. My tiny, cigarette-case-sized console is the newest part of a growing "cloud-gaming" empire called OnLive. Unlike traditional game devices—everything made by Nintendo, Microsoft, Sony, or Apple—OnLive's console doesn't contain any high-performance hardware to render the immersive 3-D pictures you see in modern games. Instead, OnLive processes all graphics on specialized servers located in Silicon Valley, Northern Virginia, and Texas. Every time your game image changes—or every time you press a button on your controller—the update goes screaming over the Internet in real time.

Yes, this doesn't seem like it should work. Pretty much everyone in the tech industry thought OnLive was vaporware when it was proposed a few years ago; the Internet, we all argued, is too slow to handle high-definition images in real time. But the team behind OnLive spent years perfecting ways to reduce network lag along every step of the path between you and its servers. When OnLive launched on PCs over the summer, it was a revelation. Because all the processing took place far away from your machine, OnLive allowed gamers to run high-performance titles on rinky dink hardware. At the time, I wrote that "playing OnLive was indistinguishable from playing games on a console or PC—except when I looked down at my computer and saw a machine that any serious gamer would laugh at."

Now OnLive is getting even better. Today the company will begin taking orders for its new MicroConsole, which lets OnLive games escape from PCs and stand side-by-side with the Xbox 360 and PS3 on regular TVs. The console—which will begin shipping on Dec. 2—sells for $99 and comes with a wireless controller and your choice of one OnLive game. (Games sell for up to $50.)

I've been playing with the MicroConsole for several days, and I've found it nearly flawless. Despite its size—slightly wider and chunkier than the original, quite-chunky iPod—the console is capable of delivering dazzling high-definition graphics (it packs what video geeks call 1080p output, which is very sharp). The actual image quality you get, though, depends on the size of your TV and the speed of your Internet line. In general, the faster your line and the smaller your screen, the better it looks, OnLive says.

But I had a pretty good experience on every set-up I tried. At home—where I've got a 20 megabit line and a 42-inch TV—OnLive's picture was crisp; I noticed only slight blurring in some fast-paced sequences, but these moments were fleeting. When I switched the console to my 24-inch computer monitor, it wasn't noticeably different. At the hotel—where the TV was 32 inches and Internet speeds ranged from about 4 to 6 megabits—the picture was a bit more pixilated at times, but I only spotted distortions when I was looking for them. For the most part the service performed exceptionally even on a hotel line.

OnLive says that the system will work with line speeds as low as 3 MBPs. I've noticed that playing OnLive on a PC over Wi-Fi (an option that wasn't available when the system launched in June) can sometimes cause pretty big drops in video quality. But to my mind, the convenience of being able to tap into the games you've been playing on your console makes up for these occasional hurdles. Indeed, it was pretty dumb of me to take the MicroConsole on my travels with me, because I could just as easily have used my Mac to access OnLive. Like a Kindle book or a Netflix movie, the best thing about playing an OnLive game is the way it switches seamlessly between different kinds of hardware—you can start up a Virtua Tennis on your console connected to your TV, and then pop back into it on your laptop at Starbucks the next day.

When I raved about OnLive in June, there were fewer than two dozen games on the system. Now there are 40, and the company keeps adding more—new titles are often released on the same day as on competing platforms. For a typical game, you might buy a three-day-pass for about $7, a five-day-pass for about $9, and a full pass from $20 to $50. Most games also offer a free 30-minute demo.

When I described this plan in the summer, several commenters pointed out two potential downsides of amassing a library of games on OnLive. At the time, OnLive announced that it would one day begin charging a $5-a-month access fee. That raised some red flags—if you ever chose to stop paying your $5, would you lose access to all your games? Even worse, critics fumed, when you buy a "full pass" to an OnLive game, you're given what looks like an expiration date—OnLive tells you that it's committed to supporting that game for a minimum of three years. What does that mean? Will your games expire after three years? Will you have to buy new ones? The plan suggested that, compared to the games-on-disc-model, cloud gaming could diminish gamers' rights.