Many people are confused as to exactly what cloud computing is, especially as the term can be used to define almost anything. Roughly, it describes highly scalable computing resources provided as an external service via the internet on a pay-as-you-go basis. The cloud is simply a metaphor for the internet, based on the symbol used to represent the worldwide network in computer network diagrams. Financially, the main appeal of cloud computing is that customers only use what they need, and only pay for what they actually use. Resources are available to be accessed from the cloud at any time, and from any location via the internet. There's no need to worry about how things are being maintained behind the scenes – you simply purchase the IT service you require as you would any other utility. Because of this, cloud computing has also been called utility computing, or "IT on demand". This new, web-based generation of computing utilizes remote servers housed in highly secure data centers for data storage and management, so organizations no longer need to purchase and look after their IT solutions in-house.

Cloud Application. This is the apex of the cloud pyramid, where applications are run and interacted with via a web browser, hosted desktop or remote client. A hallmark of commercial cloud computing applications is that users never need to purchase expensive software licenses themselves. Instead, the cost is incorporated into the subscription fee. A cloud application eliminates the need to install and run the application on the customer's own computer, thus removing the burden of software maintenance, ongoing operation and support.

Cloud Platform. The middle layer of the cloud pyramid, which provides a computing platform or framework as a service. A cloud computing platform dynamically provisions, configures, reconfigures and de-provisions servers as needed to cope with increases or decreases in demand. This in reality is a distributed computing model, where many services pull together to deliver an application or infrastructure request.

Cloud Infrastructure. The foundation of the cloud pyramid is the delivery of IT infrastructure through virtualization. Virtualization allows the splitting of a single physical piece of hardware into independent, self governed environments, which can be scaled in terms of CPU, RAM, Disk and other elements. The infrastructure includes servers, networks and other hardware appliances delivered as "Web Services", "farms" or "cloud centers". These are then interlinked with others for resilience and additional capacity.