Excellent explanation of MS's cloud computing...

Nice to see somebody that has actually worked with Azure explain in a way that people can understand. 

http://www.reddit.com/r/xboxone/comments/1gr6lp/xbox_ones_cloud_explain_it_like_im_five/

TL;DR:

Computations that do not need to be calculated (and completed) at the same rate as the update/frame cycle (~60fps) can be offloaded to the cloud servers. Whilst the cloud servers can easily handle these calculations, right now, your connection probably can't send/receive them fast enough (d@mn you, Physics!!!).

Basically, it means that your Xbox can be dedicated purely to graphics and precise, crisp, core gameplay logic.