Last year, Valve introduced a closed beta test for Steam's in-home streaming capability. The feature allows PC games to be streamed from one machine to another over a local network. It's a vital piece of the puzzle for the whole SteamOS initiative, and the beta is now open to all. Steam users can sample in-home streaming by joining the general Steam beta program via the client's account menu.
Valve has several recommendations for prospective streamers. You'll want a quad-core CPU on the host side, the company says, plus a GPU with H.264 decoding support on the client side. Streaming may work with lesser hardware, but the experience won't be optimal. Valve also recommends a wired network, though it notes that people have had "some success" getting streaming working over faster wireless networks with strong signals.
The current implementation lets users adjust the game stream's resolution and bandwidth usage. There are options to enable and disable hardware-accelerated decoding and encoding, as well. Valve suggested in January that hardware-assisted video encoding and decoding were key to reducing lag, so you probably want to leave those options enabled.
In-home streaming remains a work in progress, and there are still a few limitations. Surround-sound audio is converted to stereo right now, Valve says, and voice recording doesn't work. The host requires a newer version of Windows, too. Windows XP, OS X, and Linux are apparently limited to client duty at the moment.
Interestingly, the general troubleshooting guide notes that Steam will stream the user's entire desktop if the game loses focus. The desktop stream is supposed to allow users to return to their gaming session, and it suggests the underlying framework is fairly flexible. Indeed, Valve notes that streaming may also work with non-Steam games that have been added to the user's library, although this capability isn't supported officially.
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