Explained in terms that a non-technical person can understand

Until the late 19th century, people produced their own power. They connected their horse, windmill or water wheel to run their own machines. However, in the late 19th century, power plants were invented to produce large amounts of power in a single unit and transmit to every home. Now, you no longer need to run your own power generator like in the picture above or move your muscles to grind stuff. You could just flick a switch.

Cloud computing is doing to computing what power plants did to power production 150 years ago. Just like the farmers above, we are still running big computers at our home - to store data, run software etc. Your PC is as powerful as the ones that sent a spaceship to the moon 45 years ago. Why do you need such a powerful computer at your home? What if you could move all these computers to some remote location and through a wire just access relevant data at the right time to your iPad or phone?

The revolution in electric power production changed the world. In the same way, this change in computing could produce a big change in the way thing work.

What is cloud computing?

To start simply, think of cloud computing as using someone else's computer. For instance, if you are using Gmail, you are storing your mails on Google's cloud. Your emails are not in your local PC, but in Google's hard disc. If you are storing files on Dropbox, you are keeping your files on Dropbox' cloud. Or think of what happens when you play a video on Youtube. All the movie files are in Google's computers while you are able to watch them 1000s of miles away from it. In short, a cloud in this case refers to a group of connected machines with storage drives and processors that becomes an extension of your local computer.

Each of these companies have large data centers that look like factories with millions of computers kept in endless racks. Look at one of Google's data centers below [each blue light is a computer]. It could consume as much power as a small hydroelectric power station could produce.

Millions and millions of such computers are kept in the data centers where your emails are stored and various processes run - like when you search for something on Google. Like Google, all major companies run their own data centers - Microsoft, Yahoo, Apple, Amazon all have their own stack of computers in such "factories".

Why is there a big talk of cloud?

Previously, companies and consumers just bought their own computers and maintained it. You will use your PC to store all your songs, videos, files etc. In the same way, your company will maintain its own servers for storing all the company's documents.

This process is inefficient as maintaining computers is expensive. You need to do all the hard-work like periodically buy new computers, update the OS, secure the system and back data up periodically.

Do you produce your own electricity or farm your own food? So, why do you need to buy your own computers, when all you need is information?

Just like a power plant takes care of all the machines to just help you final output - electric power - a cloud computing company takes care of all physical computers so that in the end I just need my information. This makes a huge improvement to businesses. In the startup I co founded, I use 8 servers and none of them lived in my office. These were all in Amazon's data-centers and they just "rented" these computers on an hourly basis. I could store information and run all the processes, while they care about buying hardware and taking care of security.