The streaming of other OS games from your other OS systems seems like a pretty compelling and surprising feature. I wonder if it will work with all games.
I can't see how they'd manage to get twitch games like online FPSes to be playable with the addition of another layer of latency between the player and the game. A 100ms delay between input and response is death for games like that.
Google 'Gaikai'. It's a 'good enough' playing experience even when streaming from an internet server (though the server needs to be local to keep latency in check). Streaming over the LAN should be very acceptable.
Input latency is going to be <1ms. The payload is tiny and will fit in a single packet, and if your LAN's latency is more than 1ms your LAN is bad and you should feel bad.
Audio & Video, on the other hand, is more interesting. Let's assume everything is running at 60fps. Your encoder is therefore not adding any more than 16ms (if it was more, it wouldn't be keeping up and therefore not doing 60fps - it could definitely be less, though). Blu-ray is 48mbit/s, but for 24fps (youtube 's 1080p is ~8mbit for comparison). Let's take that same 48mbit/s, but adjust for 60fps instead. 1 frame would therefore be 0.8 mbit, or 100KB. If your network can do 48mbit/s, your video latency would therefore be 16ms. If your network is faster, though, the latency drops proportionally. Even a cell phone can do 100mbit/s on wifi, which would be 8ms of latency. A gigabit network would transfer that 0.8mbit needed in about a millisecond.
So your total latency of input, encoding, and transmission of the frame would be 32ms at most, and if you have a fast network & computer it could actually be down in the 5ms or less range.
There's latency for pings and latency for sending moves to a multiplayer server, those are going to be low on the LAN. Then there's user experienced latency for sending high frame rate HD graphics to another machine every frame and the input back from that other machine. That is not going to be without hiccups, even on a LAN.
In reality, most consoles are hooked up by WiFi nowadays which will make things even worse. Android manufacturers have struggled with smooth display mirroring over WiFi for a long time and the only time I've seen it work good enough for gaming is WiFi Direct connections via Miracast or wired connections via MHL.
Latency is a measure of the time it takes for a packet to travel to its destination. No part of ethernet networks cares what the payload in those packets are. You don't magically get more latency because the data in them can be interpreted as frames of video.
You can look up latency and it has a more general meaning. We're talking about a time delay. In this context we're not concerned about the time it takes to tranfer a single TCP packet, we're concerned about the time it takes to transfer a complete frame of video (under the assumption that a complete frame is required before the receiving end can display it). So bandwidth plays a role, and if you're sending larger frames then the delay from source output to destination display will be larger. This is latency.
Of course it does, but we're not talking 10Mb/s networks here. People stream 1080p content all the time, gigE can handle that no problem. The only latency concern would be the encoding step, not transferring the data.
Not packet latency, but total latency added by streaming the video and controller inputs over WiFi. It's not the ping itself, but the perceived delay between input and response that matters for the gamer.
Online FPS haven't been twitch based since the times of Quake 3 and Painkiller. Because they had local lan. And CRT monitors able to deliver 120 FPS. The moment online gaming moved to hosted servers and TFT ... well I still find them too slow even with 50ms ping.
Latency on local network is at most a few ms most of the time. If they can squeeze input/output on 100 Mbps ethernet without much delay it should be good.
Main reason seems to be that while SteamOS can only handle games that have Linux support the streaming allows you to have "HTPC" SteamOS connected to TV and play anything that Windows machine would be able to play.
Of course there's the input lag etc which might be an issue in some FPS games etc (which they mention that they're trying to "reduce in operating system level")
