Last Friday, OnLive founder and CEO Steve Perlman revealed that he demonstrated his company’s upcoming game streaming technology on an iPhone. OnLive promises to shake up the games industry by pioneering “cloud gaming,” in which massive data centers do all the heavy lifting as gamers play titles through a small box connected to their TV or via a web browser plug-in.

“Today,” Mr. Perlman wrote, “I FINALLY get to answer a question that so many people have been asking about: Yes, OnLive works on cell phones, too. Today, at a Wedbush financial conference in New York I showed OnLive running simultaneously on 2 iPhones, a TV, and a computer. What is really cool is that all 4 devices had access to the full OnLive Game Service.”

He went on to say: “That said, it’s important to understand that a cell phone is a very different beast than TV, PC or Mac. And while we’re thrilled about eventually bringing many new games to cell phone platforms, currently, games on OnLive are tuned for TVs and computers. So initially, it’s the Community and Social elements of OnLive that we’re most excited about on mobile devices.

“I’m afraid we are not announcing a date for availability of OnLive on particular cell phones just yet. We have further development to do, and we need approvals from some cell phone makers before we can release OnLive to the public. So, for now, OnLive on a cell phone is only a technology demo.”

When OnLive was revealed at the Game Developers Conference earlier this year, it was met with a mixture of excitement and skepticism. On one hand, it enables consumers to play games without spending money on expensive consoles or high-end computers. It also gives the Mac a chance to finally be on par with the Windows world, rather than continue to be an also-ran.

On the other hand, the technology is obviously very bandwidth-intensive, which raises many questions about its ability to deliver a satisfactory experience. In addition, it’s not clear that consumers will trust their entire gaming experience to the cloud, since an Internet outage on their end will deny them the ability to play games at all, and the recent T-Mobile Sidekick outage, and subsequent partial data loss, could harm their trust in the concept.

For game publishers, however, cloud gaming promises to end piracy and give them one platform to develop for, significantly cutting costs in an industry where it can cost millions of dollars to get a AAA title out the door. It also ends the practice of buying and selling used games, a revenue stream that game publishers don’t participate in.