At the outset we would like to state that we would not try to define or redefine the term cloud computing.This is what analysts , marketers and media does better * unlike us, programmers. The diagram below shows the broad categories in the domain of cloud computing.The bottom of the pyramid where they say the fortune lies is the “Infrastructure As A Service  ” which allows you to outsource the entire software ecosystem (From Application Servers to Database Servers running on top of the OS of your choice).Amazon’s EC2, which “is a web service that provides resizable compute capacity in the cloud”, is the biggest player in this space.This gives you very high flexibility in composing your application environment due to the possibilities in customizing Amazon Machine Images (AMI) or using the pre-configured ones provided by the software vendors.

The second and in our view, the most important cloud service is the Platform As A Service.Have you ever thought that the primary focus of the Business Application Developing Companies and the companies that provide various services over the internet (e.g. A real estate service provider), should be developing & maintaining the business logic of the application and NOT tweaking the software and hardware infrastructure.But alas,most of the time is consumed in creating & maintaining the infrastructure.Well, PaaS was invented to solve exactly this problem.Google AppEngine is the major player in this field which “lets you run your web applications on Google's infrastructure”.

The third is the SaaS (Software As A Service) where one can just log in to the cloud and use the software,unlike desktop software they don’t require installation (think of Google Docs/Acrobat.com vs. Microsoft office).

*You may take a look at “Twenty-One Experts Define Cloud Computing” for an exhaustive definition