According to the following assumptions, I think Cloud based VR would be the future:
1) Real world scene rendering needs ray tracing or other complex computing graphics technologies. It needs a lot of computing power.
2) Single GPU can't afford enough GFLOPS for that. And the powerful GPU is costly and hot. Since the moore's law is ending soon, the process of GPU will also end evolution, that means GPU can't get much faster than needed.
3) Mobility is the king. But mobile GPU speed will be limited by the power and process. It won't get much faster too.
4) Cloud gaming would be promise for that. The network bandwidth and latency would be the biggest issues. Since Google Fiber has been deployed, I don't think network is the issue in the future.
5) Rendering a real world needs unlimited computing power, but human eye resolution is limited. Limited resolution means limited network bandwidth consumption. For example, 1Gbps is enough to transmite 8K/16K H265 streaming video in stereo format.
So, I believe Cloud based VR (Rendering in Cloud and stream to the client) would be the future. Am I correct?
added more detail @20160406
I did some research on it. The motion-to-photon has to be less than 20ms. Maybe only 5ms is left for round trip network. So that the Cloud DC has to be very close to the client. In case optical fiber access, only two hops ( switch and BRAS ) to local router and then to local Cloud DC. (Transmission speed in optical is 200K KM/s, so 100KM radius would take only 0.5ms. That means Cloud DC would cover 30K square KM area.)If no network congestion with good QoS policy, the network latency would be very low. At the mean time, use distributed GPU clusters to render the VR content and then stream it to the client in parallel to reduce the time further. Let's count the time consumptions during each stages. 1.5ms for head tracking and local cpu processing. 1.5ms for network transmission to Cloud. 1.5 ms for distributed GPU cluster rendering and encoding. 5ms for network transmission to client. 1ms for decoding with special decoder since current video decoder designed for video playing not for VR. 5ms for transmission to monitor (equal 200Hz monitor, or very high bandwidth transmission as display port 1.4). The total time is 1.5+1.5+1.5+5+1+5 = 15.5ms. Of course, if using Foveated Rendering technology, addition 3ms for eye tracking delay, but the network bandwidth and latency will be reduced.