What you guys are forgetting, is that physics like that demo are not necessary to gameplay itself (i.e. player vs player)... but the end result is the same (removal of the particles / building walls). Therefore, if 1 machine shows the results of the physics calculation quicker, or slower (by milliseconds), it's not a game breaking mechanic.
However, from my general (and very basic) understanding of physics calculations in video games... it takes a LOT of processing power for multiple calculations. For example: games that allow you to disable rag doll physics, or other particle physics, due to the load it creates on your CPU (thus, dropping your frame rate); GPU's that have built in physics processors (i.e. nVidia's PhysX processor).
So the way I see it, graphically.... games are not improving under the cloud. It's not making a scene render faster, by offloading render processes. It's not creating extra anti-aliasing or shading. All latency important calculations must be done on client. But certain AI? Sure. Physics? I could see it in some situations. I wouldn't say ALL physics are offloaded to the cloud (live player physics would be done client side).
But that building was a pretty good example.
In Titanfall, there's a ton of background AI and imagery going on, and I think that's what they are referring to using the cloud (and the dumb bots of course).
