What is a "Cloud OS"?

Question

The term is getting 'hotter' with Microsoft Azure and Windows 7.
What are the benefits + how does the status quo of desktop computing now change? Does the machine no longer need an OS installation (or a highly stripped down version of a typical OS)... what is needed to interact with the 'Cloud' ?

Update: Received my first RTFM on SO today.
To elaborate.. I'm interested in knowing how different is the 'new way' w.r.t. the services provided by a typical desktop OS today (read Win XP/Vista, linux flavors galore, etc.)... NOT the benefits of cloud computing.

Answer 1

Two buzzwords.