The way I like to describe it is in its most primitive format, the "cloud" is a web service hosted at a highly redundant and readily available datacenter that is accessible by anyone through an app or browser available on a multitude of different devices.
Cloud 1.0 - Cirrus (high and wispy clouds capable of very little)
Many websites could be considered...I guess...individual "clouds". They do follow the definition above as they are hosted elsewhere, redundant and readily available. So take for example a website like www.myspace.com
When it originated it was pretty simple...a system designed to allow people to host individual webpages for themselves It didn't reach out to the web much, but was its own ecosystem developed that ran on its own servers that were hosted in a datacenter.
Cloud 2.0 - Cumulus (mid level clouds that have potential to create some interesting weather and lightning)
Cloud 3.0 - Mammatus (low level clouds that seem right in your face...looking very powerful)
So, we have basic websites in the "cloud". These websites could be considered "applications" in a way. Normally most people think of an application as something that you install on the computer. But at its basic, an application is a piece of software used to accomplish a specific task. Myspace for example is a piece of "software" that allowed individuals to create and maintain their own personal website. However, the more functional generic software is what more people think of...like Microsoft Outlook or Adobe Photoshop. These applications were installed and run from your local machine. This is great in so many ways, but really limiting in another.........what if you aren't at your machine? The need to be able to perform the functions of these applications but in a way that accessible through the cloud was important. So, we now have fully developed rich applications that reside in the "cloud" as opposed to on your machine. Google Apps, Zoho Online Business Productivity Suite, Microsoft Office 365, Salesforce.com are all prime examples of where the "cloud" is now in its more advanced form. It still follows all the basic rules as described above, but it is now delivering to the user applications that were originally designed to be installed locally on their machine. This allows you access to the software ANYWHERE...not just on your machine. There are about a zillion reasons why this is good and still quite a few why it is bad, the numbers are growing in its favor.
I am not really sure if I have done much good here describing this. I hope that I have managed to clear up in some manner what people's understand of the "cloud" is. It is more than just the iCloud (which btw is very primitive and is late to the game). It is something that should be embraced and not feared because it is unknown. It is definitely not a single thing and is unfortunately a flexible term in a world of technology that is usually 0's and 1's...not subjective.
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