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Cloud computing is a technology that uses the internet and central remote servers to maintain data and applications. Cloud computing allows consumers and businesses to use applications without installation and access their personal files at any computer with internet access. This technology allows for much more efficient computing by centralizing storage, memory, processing and bandwidth.

A simple example of cloud computing is Yahoo email, Gmail, or Hotmail etc. You dont need a software or a server to use them. All a consumer would need is just an internet connection and you can start sending emails. The server and email management software is all on the cloud ( internet) and is totally managed by the cloud service provider Yaho , Google etc. The consumer gets to use the software alone and enjoy the benefits. The analogy is , 'If you need milk , would you buy a cow ?' All the users or consumers need is to get the benefits of using the software or hardware of the computer like sending emails etc. Just to get this benefit (milk) why should a consumer buy a (cow) software /hardware ?

Cloud computing is broken down into three segments: "application" "storage" and "connectivity." Each segment serves a different purpose and offers different products for businesses and individuals around the world.

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http://www.ibm.com/developerworks/training/kp/cl-kp-cloudfundamentals/
In a cloud computing system, there's a significant workload shift. Local computers no longer have to do all the heavy lifting when it comes to running applications. The network of computers that make up the cloud handles them instead.
http://computer.howstuffworks.com/cloud-computing/cloud-computing.htm
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