I am an avid OnLive user and this is awesome news. I have 15mbps FIOS and have a very good experience with OnLive. Picture quality is excellent and the OnLive controller is also very good. Well made with nice button placement. Having it on the iPad will be cool to say the least.
If you have the proper setup, then OnLive does add about a 40ms lag. For most games, this is very acceptable.
One thing to remember with OnLive is that when you are playing a multiplayer match, there is also an extreme REDUCTION and consistency of in-game lag (the one that is reported by the game on the leader board) by nature of the fact that the OnLive game servers (say, for Homefront) and the game clients are sitting right next to each other in a server room. In-game lag is almost always very low.
For me, I'm looking at a total lag of about 80ms for multiplayer games, and 40ms for single player games. You can decide for yourself if that is good enough for you to play. For me, that is totally fine and a quick google search for "average latency game" reveals many gamers playing in the same range.
