Michael Peterson, president of Strategic Research Corp., launched a storage service provider in those early years and was a business and technology adviser to StorageNetworks. He says cloud storage is a very broad term that incorporates a variety of technologies and business models. For example, some service providers use distributed, commodity storage, while others might use traditional midrange or high-end storage frames. That means that it's important to understand what you're buying.

But there is a common theme: . "[Cloud storage] includes everything and is a virtualization model," Peterson says. Cloud is a catalyst for change, not a technology, and as such, it will bring about broader use of virtualized practices, he predicts.

Cloud storage service offerings range from basic file-based storage infrastructure services, like Amazon's S3, all the way up to storage-as-a-service applications. With the exception of start-up Zetta Inc., most vendors aren't pitching the cloud for primary storage.

In the business market, remote backup has always been the real driver for cloud storage, Peterson says. Nonetheless, most large businesses remain on the sidelines.

One of the biggest concerns IT organizations have with cloud storage is data security. Many cloud storage vendors offer encryption for data in transit and at rest. Some, such as Zetta, make encryption the default setting. That's important because in a storage cloud, your data might be on the same disks as data from other users, says Ruth. If another customer's data is raided by the FBI, for example, could yours go with it? "The laws are not sufficient to protect innocent parties whose data is on the same equipment," says Ruth. To address that, some vendors keep each customer's data on a separate disk. Zetta encrypts each customer's data with a different key.