Utility computing is the packaging of computing resources, such as computation and storage, as a metered service similar to a traditional public utility (such as electricity, water, natural gas, or telephone network). This system has the advantage of a low or no initial cost to acquire hardware; instead, computational resources are essentially rented. Customers with very large computations or a sudden peak in demand can also avoid the delays that would result from physically acquiring and assembling a large number of computers.

"Utility computing" has usually envisioned some form of virtualization so that the amount of storage or computing power available is considerably larger than that of a single time-sharing computer. Multiple servers are used on the "back end" to make this possible. These might be a dedicated computer cluster specifically built for the purpose of being rented out, or even an under-utilized supercomputer. The technique of running a single calculation on multiple computers is known as distributed computing.

Source: Wikipedia