In fact local maintenance is the driving force behind web apps already. They generally lag like a mother, have lame controls and update in whole-page flashes, but I see more every day.
Are these actually redundant carriers, or is the last leg owned by qwest and just leased to Time Warner and ClearWire?
But latency isn't such an issue for compiling etc. Someone was saying in the instant google thread that 250ms is imperceptible for search (and I've heard 200ms for the command line, from Rob Pike on Go). That's much lower hanging fruit than for gaming, where 250ms latency is far from instant but unplayable.
Yet, it works. Shockingly well. Better for FPS games than strategy games actually (you notice lag on a mouse cursor more than anywhere else).
My pictures are all stored "in the cloud" (on facebook, or flickr, or photobucket). "My" music doesn't even really exist anymore, it is playlists on grooveshark, or stations on pandora.
Documets? Google documents.
I do all of my web development on VIM running VPSs.
The only stuff that doesn't happen "in the cloud" is specialized, media-creation type things, an activity that I would be surprised if more than 5% of the population participates in.
There isn't really any data to be backed up here, except for the web dev things. For that, there are three servers that all exchange rsyncs every night. One is prod, one dev, and one that is just using some spare disk space on one of the arrays at work.
For the photos, the online stuff is the backup. The originals still live either on their negatives, or on SD cards.
It seems a bit ridiculous, because you still need a bit of local power for display and fast reactions, and current iPhones/netbooks could do with more power. But desktop PC's have been fast enough in that respect for a while. An advantage of the cloud is that as RAM, cycle prices etc drop, you get it (more of them or cheaper) without the hassle of physically upgrading. And bursty usage is available too, eg. when compiling.
There's solid economics here: it's a sort of timesharing idea, instead of cycles being wasted while you type, someone else uses them to compile. Even more compelling globally - someone else uses them while you sleep. The same argument works for sharing your desktop's own cycles, p2p, but a centralized cloud has admin advantages and other economies of scale.