Cloud computing gets its name as a metaphor for the Internet; so any processing, sophisticated storage and retrievals, that happens over internet is in its most simplistic form referred to as “Cloud Computing”!

The origin of the word “Cloud”:

A network diagram is usually comprised of a server, client, switches, router, and the extensions beyond the perimeter of perception i.e. internet. Internet has always been represented as a cloud in almost all the network diagrams and flowcharts (see below for a sample):

Evolution and shaping of the cloud:

The contemporary usage of the word cloud computing is for anything that involves delivering hosted services over the Internet. These services are broadly classified into three categories:

1. Infrastructure-as-a-Service (IaaS) – Where infrastructure is delivered as a service in the form of periodic subscriptions or specific term service.  Example: Amazon Web Services provides virtual server instances with unique IP addresses and blocks of storage on demand
2. Platform-as-a-Service (PaaS) – A wide array of development tools, IDE, plugin, version control system, etc is provided as a service. Example: Force.com, (an outgrowth of Salesforce.com) and GoogleApps are examples of PaaS
3. Software-as-a-Service (SaaS) - A specialized software meeting the requirements of a specific domain is provided on subscription basis.  Services can be anything from Web-based email to inventory control and database processing.

Following a video from salesforce.com that is a great introduction to cloud computing:

Some excerpts: [Note the keywords in bold]

Life before cloud computing

Traditional business applications—like those from SAP, Microsoft, and Oracle—have always been too complicated and expensive. They need a data center with office space, power, cooling, bandwidth, networks, servers, and storage. A complicated software stack. And a team of experts to install, configure, and run them. They need development, testing, staging, production, and failover environments.

When you multiply these headaches across dozens or hundreds of apps, it’s easy to see why the biggest companies with the best IT departments aren’t getting the apps they need. Small businesses don’t stand a chance.

Cloud-computing: a better way

Cloud computing is a better way to run your business. Instead of running your apps yourself, they run on a shared data center. When you use any app that runs in the cloud, you just log in, customize it, and start using it. That’s the power of cloud computing.

Businesses are running all kinds of apps in the cloud these days, like CRM, HR, accounting, and custom-built apps. Cloud-based apps can be up and running in a few days, which is unheard of with traditional business software. They cost less, because you don’t need to pay for all the people, products, and facilities to run them. And, it turns out they’re more scalable, more secure, and more reliable than most apps. Plus, upgrades are taken care of for you, so your apps get security and performance enhancements and new features—automatically.

The way you pay for cloud-based apps is also different. Forget about buying servers and software. When your apps run in the cloud, you don’t buy anything. It’s all rolled up into a predictable monthly subscription, so you only pay for what you actually use.

Finally, cloud apps don’t eat up your valuable IT resources, so your CFO will love it. This lets you focus on deploying more apps, new projects, and innovation.

The bottom line: Cloud computing is a simple idea, but it can have a huge impact on your business.