Instead of keeping the key in a potentially vulnerable place, they're putting it in an oracle: pass ciphertext to the oracle, get plaintext back. I'm interested in the authentication between CloudFlare and the oracle. Cryptographic examples involving an oracle tend to refer to the oracle as a black box that just blindly accepts data, transforms it, and replies. Of course, then the oracle's content (a key, an algorithm) risks exposure through deduction if an attacker can submit limitless requests. See http://en.wikipedia.org/wiki/Chosen-plaintext_attack
I'm not at all suggesting that CF hasn't thought of this; rather I want to see their mitigation of the risk.