Cloud computing is not magic. There are real servers behind it. Don’t get blinded by the science as cloud computing is not fool proof. Cloud failures do happen: http://bits.blogs.nytimes.com/2011/04/21/amazon-cloud-failure-takes-down-web-sites/
Here are some links to explain what it is and show the benefits and pitfalls of this technology.
More on cloud computing (known as Software as a Service: SaaS in geekspeak):
“Privacy “Software as a Service” Agreements and the Transfer of Personal Information”: http://www.gowlings.com/Services/Technology/TechLawIssues2010-11/Martin-Finestone-Privacy-Software-as-a-Service-Agreements-and-the-Transfer-of-Personal-Information.pdf