I was playing with a VPS I have and was wounder why I could not (theoretically) play games on this?
We have things like Nvidia Grid and Onlive that already accomplish this same task, but they can only play games that are on there estore and do not allow the execution of third party applications.
A better method would be to combine the technologies with VPS's that let you run any OS you choose (Windows or Linux) with any program you want from any store you want. (Steam or GOG)
This system would be kind of like a rental remote desktop with low latency and higher bitrates.
This would also be great for things like video edit/rendering.
You can do this with Virtual Machines and VGA passthrough on some Tier 1 Hypervisors. Latency will depend on your distance from the computer.
But yes with things like Xen Hypervisor, I beleive it allows the IOMMU and VT-D extensions, you can set up multiple OS Virtual machines and remotely connect to them. With proper Virtualization extensions you can dedicate graphics cards to certain machines and pass them through for direct access to the virtual machine.
If you wanted to run it on somebody like Digital Ocean or Linode that only does OpenVZ, you may be out of luck, I don't think CTs can run X servers but correct me if I'm wrong