i've only used the wifi beta, and there's a tiny amount of lag, but not enough to matter in most single-player games.
I'd like to try it out hard-wired, because that's what it was designed for.
And for multiplayer, it's not lag on top of lag. Because everyone is going through the same server, everything's processed at the same place, so it's like a giant LAN, so there's just the normal amount of lag.
OnLive is the first thing of it's kind, so it obviously hasn't been perfected yet. I just see this kind of idea going places in the future. With this technology, you could technically play any game with any graphics on a cellphone, ipod, netbook, and tv.
Either way, I just think it's really cool.