The game is rendered remotely and broadcast to one or multiple clients that display the output and handle the input. The network introduces a massive round-trip (input -> network -> remote -> network -> display) latency compared to running the game locally, so it's only really viable for most games where the internet infrastructure allows it (so Australia and much of Europe are out). The advantage is that the remote VM can be significantly more powerful than a local machine.
The early service was both an experiment/development version and a loss leader to get people to join the service in the first place. Price hikes and free service degradation were planned and inevitable.
It amazes me how every time a for-profit company that provided a free service goes mask-off and starts aggressively monetizing it so many people put on a shocked Pikachu face.
This is exactly how this works, people! The free shit is always bait to draw you in and get you invested. The trap was designed from the start to snap shut once there was enough of you in it. They fully intend to not just extract value from you to run the service, but also to retroactively pay for all the free shit they gave you. It was always a loan. An investment.
Oh, sure, you can always be sly by taking the free shit and ditching once monetization comes over the horizon. But do so knowing that every time you need to do this is the rule, not the exception. Companies aren't suddenly slighting you one by one out of the blue, it was always the strategy from the beginning for all of them.
Yeah... The only good thing of offering free tier is to fill gaps of unused machines during low usage hours, as they otherwise have the machines unused. Of course it only makes sense if that makes you money, like people testing it that eventually subscribe, having ads on it or similar.
Well... Let me tell you some people doesn't have that much time to game at once...specially the ones that didn't get a gaming computer or console which this would benefit.
On the other hand I guess the free tier has queues so not sure if it would help for those.
I know, I tried it, and had to wait half an hour for a spot right after lunch time, the queue for the prime time gaming hours of 18 to 22 must be even longer.