Can some technical bastard please get the fuck in here and explain to us why everything the Forza guy said about the cloud was complete bollocks? What exactly is stopping the game from analyzing and creating the player's 'drivertar' entirely from the clientside?
So a supervised machine learning algorithm (a neural network, a support vector machine, et. al.), relies upon massive quantities of data to generate "parameters". Once you have the parameters, the AI algorithm is straightforward. The hard part is calculating these parameters, since you need lots and lots of data, and lots of computing horsepower. What the cloud does that a single user cannot do, is collect lots and lots of data, since it can collect data from many users. And it can crunch on the data without blocking the game itself. (A program that calculates machine learning parameters for a moderately complex problem might take hours or even days to run).
So for example, assume you have a race with maybe 3 turns in the race, and you record at what point the driver started to turn, their velocity before breaking, the amount of turn, etc. You also record their total time in the race.
You take this data from lots and lots of people, and you can generate parameters that will predict that if you take all these turns in a certain way, you will achieve a total race time of X seconds.
If this sounds complicated it is because it is, and people who do this well get paid lots of money.