Imagine playing video games on an Xbox 360 or PlayStation 3 console attached to your flat-screen TV, with a stack of game disks next to it.

Now take away the console and the disks, and you'll begin to get the idea behind OnLive, a new online service that does with high-end video games what Netflix is doing with movies: stream them over the Internet straight to your screen, in this case via a palm-sized adapter that plugs into the TV and your home network.

When OnLive's technology was first demonstrated in public, it was greeted with a wave of skepticism. "Can't possibly work," one gaming website concluded in 2009. I've been using it for several weeks now, and it's clear that the skeptics were wrong. It does work, and -- with a few important limitations and caveats -- it works well.

This is disruptive, maybe even revolutionary, technology that has the potential to upend the multibillion-dollar game industry. Consoles such as the Xbox 360 and PS3 take years to develop, require a lot of computing horsepower and cost hundreds of dollars. The OnLive Game System has none of that overhead. It costs $99, and includes the adapter, a wireless handheld controller and one game.

OnLive games tend to cost less than Xbox and PS3 versions. You can rent them for shorter periods at a lower cost or try out new titles for free. Of course, you're not actually buying or renting the physical game; you're paying for the rights to play it in the cloud, on OnLive's remote servers. The service also just introduced a Netflix-like all-you-can-play plan for $9.99 a month for a selection of its titles.

Setting up the system isn't complicated, but it does have a few wrinkles. The microconsole, as OnLive calls the adapter, plugs into an electrical outlet, and into one of the high- definition HDMI ports on your television. (A cable is available at extra cost for your TV if it doesn't have HDMI.)

Then comes one of those wrinkles: The adapter doesn't work over Wi-Fi, requiring instead a hard-wired Internet connection. This isn't a problem if your TV is located near your router or if your home has built-in Ethernet. If not, you'll have to come up with some other solution, such as using a set of powerline adapters for transmitting a signal over electrical wiring or a wireless bridge that provides a Wi-Fi-to-wired connection. Either way, it's an additional expense and extra hassle that will make you long for a Wi-Fi version of the adapter.

While OnLive's library is growing, it's still limited to about 50 titles. You won't find newly released games such as Activision Blizzard's "Call of Duty: Black Ops"; indeed, Activision so far hasn't made any of its titles available for OnLive, nor are there games from Electronic Arts. But you'll find plenty of other recent hits from major publishers: "NBA 2K11" from Take-Two Interactive, for example, and Time Warner's "Batman: Arkham Asylum."

The critical question for users, of course, is how well OnLive works. Games, with their visual richness and need for rapid responsiveness, demand a lot of computing power.

OnLive by and large delivers. Game play was swift and stutter-free over my speedy cable Internet connection. If the graphics aren't always quite up to Xbox or PlayStation standards, the differences are all but invisible unless you're paying close attention.