Cloud computing most commonly refers to the delivery of computing services over the internet as an alternative to running hardware and software in your data centre or computer room. You rent or subscribe to computing capability, rather than installing and running systems yourself. Everything from raw computing power to full blown business applications can be delivered in this way.
Most organizations that adopt cloud computing are likely to do so alongside their in-house systems, according to what makes the most business sense.
Cloud computing involves pooling lots of hardware and software together and sharing it out to whoever needs it, on demand - similar to the way a water company pools and shares its supply from rivers, bore holes and reservoirs. Service providers offer public clouds, but IT departments can use the same technology to create private clouds.