'Cloud Computing' is a somewhat nebulous term to describe users 'renting' or using online services or software instead of actually purchasing and installing it on their own computers. It is the same business model as people using Gmail or MSN mail services, except that cloud computing goes much further and includes daily computing activities.
Cloud computing is where entire businesses and hundreds of employees will run their computer tools as online rented products.
All of the processing work and file saving will be done 'in the cloud' of the Internet, and the users will plug into that cloud every day to do their computer work.
The cloud is not really a technology by itself. Rather, it is an approach to building IT services that harnesses the rapidly increasing horsepower of servers as well as virtualization technologies that combine many servers into large computing pools and divide single servers into multiple virtual machines that can be spun up and powered down at will.
There are 3 main types of clouds: