Yes, it's basically VNC applied to games. I would guess that each simultaneous user has a dedicated PC on the server side.
On top of that, they shoulder the cost of upgrading the hardware, along with the risk - another Dreamcast (high initial sales followed by a severe dropoff) would be disastrous. I'm not sure how they can pass those costs on to their customers at a price point that's attractive to anyone who doesn't play lots of games per month (also making it possibly a net loss), or that's competitive with the more scalable, more performant, and lower risk model of running the games on the client, whether it's a console or a PC.