In-Home Streaming allows you to stream games from a host PC running Windows to a client machine that can be running Windows, OS X or Linux. Simply install the Steam application on both machines, and the two will seamlessly connect together over your home network, allowing you to access the content between them.
This means that you only need to install the game on one of your pc's (the host), and the client pc's will then stream the audio and video from there, with the controls being sent back to the host from the client. In essence, the client is decoding an x264 video, which is fairly lightweight, and this will allow for cheap, low-power "Steam Machines" that can stream games from the more powerful host PC.
The In-Home Streaming update was pushed out a few weeks ago, which just so happened to coincide with me personally finishing a second HTPC build for the family room. For the record, my host PC (in the theatre) has an i5, with 8GB RAM and a Radeon 7950 graphics card. The client (in the family room) has a Core 2 Duo, 4GB RAM, and a Radeon 6670.
Once I installed Steam and the latest updates on the client, I logged in to Steam on both pc's, and straight away a message popped up saying both machines were connected, and I could see my entire game library ready to be accessed on the client pc. This is the point where I truly realised the potential of In-Home Streaming...I could have a very large / powerful / noisy / headless pc anywhere in the home (garage or closet etc) that had all of my games installed on it, then have a very small and quiet client machine hooked up to a TV anywhere in the house, and be able to access my entire library, and play any game that could be played on the host.
I loaded up a few games to test with, and it worked perfectly first time...something that rarely happens in IT with things like this! I was even able to add non-Steam games and applications into Steam, then access them through the client machine. This means I could also play Origin and Uplay games via Steams In-Home Streaming. As a side note, I could ALT TAB out of a game, and it would show the hosts desktop on the client, which could then be fully controlled...Steam's streaming appears to be based on the Remote Desktop Protocol (or something very similar).
I then thought I would try out streaming on my old netbook over wifi, to test the limits of In-Home Streaming. To my amazement, I was able to stream Hitman Absolution with minimal latency or lag. Impressive!
I could bang on about In-Home Streaming all day, but instead I suggest you give it a try for yourself, as I am sure you too will see the huge potential that this technology brings, and it will certainly give the console-making companies something to think about.