Could anybody explain in plain words how Cloud computing works? I have read the Wikipedia article, but still not sure that I understand how cloud actually works.
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It is a computing that happens in distributed on the Internet. The idea is that instead of creating your own resources, you put your data,apps in a Cloud. This cloud is assumed to have 100% availability, and infinite scalability. For more detail :http://vineetgupta.spaces.live.com/blog/cns!8DE4BDC896BEE1AD!1326.entry
Cloud computing is just a specific way to order, use and discard computers. It is similar to using banking services with help of ATM or buying things from vending machines.
The goal of cloud computing is to completely exclude any live person from provider's side.
Any other good and bad properties of cloud computing are just a byproduct of this idea.
The term is so new that there's no accepted definition, particularly since Dell (!) failed to trademark the term.
Essentially the idea is similar to that of a utility - you want electricity, but you don't care which power station supplies it because there's a network supplying electricity to everyone, and you can just tap into it. Which works for electricity, but the Internet isn't quite that sophisticated just yet. But that's the Vision.
Amazon's S3 service just provides disk space, and it doesn't care who uses it or where they are located in the world. Certainly Google's office tools (and Microsoft's web offering) offers a service, not a particular machine, which will look after your application needs. Again, you can create and work with a spreadsheet but you don't know where that spreadsheet is stored, or which machine it runs on - just that it's available when you want it.
Web 2.0 is another term struggling to find a definition, but you can imagine your spreadsheet using calculations which are embedded in another machine somewhere, and storing results of its calculations on Amazon S3. Boundaries are fading away at this point.
Because it's available wherever you log in from, it could be accessed from anywhere in the world. It's "in the cloud" because it can be seen from anywhere (not a good analogy, but ...)
Here's a good definition on what is cloud computing.
Cloud computing is about hardware-based services (involving computing, network and storage capacities), where:
There is a powerful economic force behind this simple model: providing and consuming cloud computing services generally allows to have far more efficient resource utilization, compared to self-hosting and data center type of hosting.
Snippet from this article on cloud computing.
None of those things makes your application a cloud application. It's a cloud application if it runs in a cloud. What is a cloud?
Difference between cloud computing and distributed computing?
The web site development model does tend to be amenable to running in a cloud because many parts of the system are inherently parallel. However, there are various design decisions (er, mistakes?) you could make that would limit the amount of parallelism that could be achieved, though. You can still run such a program in a cloud but it won't get nearly the kind of benefit that a highly parallel application would.
The technologies that you are talking about can be used to create highly parallel applications, but this isn't automatic, you still have to understand what you're doing.