I think too many people equate "performance = TEH SHINIEZ FPS!" though. For the most part, there's little way to really improve how a game is going to look graphically by the cloud. Where I think the real difference is going to be realized is in games with large worlds, where the developer can use the cloud to do a much more thorough world simulation than if they were constrained to the available resources on the console after all the other stuff it has to do. Rather than having hub cities be basically frozen in time when you're no longer there, your actions can actually have consequences that can be fully realized without having to detract from your active game play session - though of course, if you were offline, you could just walk back into that snapshot or the last updated world state.
Sure, something like that could be related to performance.. that's the non-latency dependent AI stuff that is technically feasible.
A game could begin simulating in the background on an XBO some randomness to a town.. say Skyrim 2 you are within 1,000 yards of a location it will kick off a routine in the background to have the NPC's be doing things, making the town different every time you visit.. but the game can't feasibly do that.. so instead if makes it really simple.. some randomization, but nothing that special.
In comes the cloud.. the game can have a "not that special" fallback routine that quickly randomizes a few things if the user is offline.. but if they are online the game could kick off a quick simu in "the cloud" for that area that returns a more interesting set of data to initialize what the town is doing when the user actually "gets there."
Or have a constantly running simulation of the entire world.. but that might be overkill.
A performance enhancement?
Sort of.... but the game will likely still need a fallback routine. That's the catch-22.. if you reserve all CPU/GPU cycles for rendering and expect the cloud to always be there to process some non-latency dependent AI that's dangerous.
So you still end up with your "last gen routine" reserved just in case.. the game has to expect to maybe have to calculate the same small simulation it did last gen when nearing a town.
The thing is, games are already doing stuff like that with or without MS's cloud. These companies might not even choose to use MS's very generous offering simply because they want to control it all on their own servers.
MS's offering represents an awesome deal for developers to do more and more of where gaming is already going and already has gone.
If anything it means more small/indie/AA style games with cool online features a pub would never have footed the bill to host before. Maybe even some exclusives because these devs can't afford to foot the bill themselves elsewhere.
