all bits considered data to information to knowledge


Hey! You! Get off of my cloud

A cloud computing is a fancy name for virtualization on demand. And private cloud means that you own it lock, stock and barrel.
Software is "soft"  because it - at least in theory - is infinitely pliable, as opposed to hardware which is much less so... With advent of virtualization the grand divide between software and hardware becomes ever more blurred. Suddenly, you can run software on software; the hardware is abstracted to a mere plumbing -  the software computer to run a software application.

Cloud computing is all about efficient allocation of resources on demand, and what makes it "cloudy" is absense of need to know where the required resource will be allocated and how it is managed. In the cloud virtual computers can be created and destroyed at the moment notice (figuratively speaking), and you can string together a cluster of virtual computers to deploy an ambitious enterprise infrastructure - something that would require significant investment in hardware infrastructure just a few short years ago...
Of course, virtualization comes with a bunch of caveats (performance, complexity etc.), and, to be sure, cloud computing adds a few of its own (resource allocation and management come to mind...).

The public vs. private cloud computing boild down to whether you want to control the hardware that the cloud resides in or you let somebody else to do so thus achieving economy of scale. All drawbacks and benefits of owning vs. renting apply.

I would also argue that cloud computing brings agility (think SCRUM) into hardware world, and I will explore this topic later.