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Cloud Computing is a kind of computing in which dynamically scalable and often virtualized resources are provided as a service over the Internet. The concept incorporates infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). Examples of SaaS vendors include Salesforce.com and Google Apps which provide common business applications online that are accessed from a web browser, while the software and data are stored on the servers.

Cloud computing is a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. Cloud computing encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT's existing capabilities.

Cloud Computing vs. Utility Computing

Cloud computing is a super set of Utility Computing.

Utility computing service is one in which customers receive computing resources from a service provider (hardware and/or software) and pay as much as you use like electric service at home.

Utility computing relates to the business model in which application infrastructure resources (hardware and/or software) are delivered. (Utility computing is a superset of Data Centers)

For an example, Amazon Web Services (AWS) provides a variety of services, among them the Elastic Compute Cloud (EC2), in which customers pay for compute resources by the hour, and Simple Storage Service (S3), for which customers pay based on storage capacity.

Cloud computing relates to the way we design, build, deploy and run applications that operate in a virtualized environment, sharing resources and boasting the ability to dynamically grow, shrink and self-heal.

In this model, all IT applications and facilities (i.e. compute, storage and network) are provided as a service rather than dedicated infrastructure. This is intended to allow any user, independent of client platform, to access IT services without knowledge or concern of their location or form. Sound familiar -- it's a service-oriented architecture (SOA)!

Cloud computing incorporates almost every computing manifestation within the IT world: distributed, grid, utility, on-demand, open source; Web services; P2P; Web 2.0 and last but not least, software as a service.

It also accommodates thin, thick and mobile clients, and allows integration of corporate, commercial and service provider cloud-accessed resources. As an example, in this model, storage is a service resource that is accessed via the cloud, not a dedicated user resource.

Cloud computing providers will invoice their customers on a utility (such as electricity) or a subscription (such as a newspaper) basis.
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