What would the world look like if we were all using rented cloud desktops as the normal state of affairs? Well, for one thing, consumer hardware would not have advanced much beyond what is necessary to display video in real time. The only place beefy hardware would be needed would be on the server side. Our network hardware, on the other hand, would be quite impressive and our mobile networks would probably be a generation or two above what we have now. People would be investing in bigger screens as their main desktop hardware investment, and only upgrading or replacing their computers when they wore out or when better screens became available.
Microsoft, Apple, Google and probably some other companies like Amazon or Canonical would be running even bigger data centres to centralise and back up everyone's personal desktops. Our phones would merely access a specialised view of those desktops. The operating systems would be upgraded as a matter of course, without our involvement as consumers at all.
The interesting questions start popping up when you consider families sharing entertainment and knowledge-work businesses. Do you have separate, shareable file storage beside your rented cloud desktop so that the whole family can access your data, or do Microsoft make you individually log in to access your desktop environment on the TV? On the plus side, this would mean if you're at a friend's place and you want to show your photos or start playing your music, you just log in and do it.
For businesses, where workers need to collaborate on projects, cloud storage becomes a must, and it needs to be secured and shared, too, so that only the right people have access to it. But that's not enough. You also need to give them access to the right tools for the job, including work email, so you need a separate desktop for each employee, in addition to what they rent for themselves at home. You might not be able to prevent them from accessing their personal desktops at work, though.
As for security, it will be a different kind of total mess. If someone got hold of your virtual desktop account, they would have total control of your entire online life, especially since these desktops would make single-sign-on a reality. You wouldn't need a password for Facebook or for your email or banking websites. Once your desktop is authorised, we could just use certificate security from then on and do away with passwords forever. Securing your desktop at that first login level with something rock-solid would be absolutely essential.
It's a funny looking world, that one, and we won't be jumping in there in one go. I don't know if we're heading there at all, to be honest, but in some ways it does seem inevitable.
Mokalus of Borg
PS - We'd have very big problems when the internet is slow.
PPS - Not like today where you can still at least play Solitaire.