1. wireless net access becomes faster and more universal. There's no reason not to have every city and small town to be covered with at next generation high speed wireless access points. Stringing copper is expensive and radio waves are cheap.
2. managed net-accessible storage. Right now gmail lets you have a gigabyte on line, and in 5 to 10 years it will be feasible to have hundreds of gigabytes online for free or a for a nominal fee.
3. Handheld device that is basically a palm-like device, but with the CPU power and OS nominally as powerful as today's top end desktop. It will also be a phone, but primarily it's a very fast processor with lots of memory, a display, next generation bluetooth near area network, and some sort of high speed USB followon, and wireless internet.
4. Mass storage approaches absurd size. Pretty soon terabyte disks, and petabytes aren't that far off.
The usage scenario is this: the thing you carry around -- your computer, telephone, movie viewer, would be very simple. voice command would be one option, but palm-esque stylus entry would be ok too. If you sit down to work somewhere, you'll have a bluetooth mouse, keyboard, and either a wired or wireless display, that handshake automatically with your handheld device.
long term storage of all the stuff of your life -- application files, movies, email, whatever -- is held primarily on servers accessible through the network. strong encryption of storage and any private net traffic will be common, perhaps even keyed by to a physical crypto key that constantly hops keys on the server and in your handheld.
When you want to use an application, you actually access it live over the network from the vendor's site. You can access either a continuously updated version of the application, or a 'known good' version. You have the option of paying by the use, paying for a permanent license, paying by subscription. A lot of common apps would be open source and freely available.
Local storage on the handheld device would comprise tens to hundreds of gigabytes of battery backed ram, and files used on the internet would be heavily cached, so if you, for instance, used an application like Cubase, the executable, all your recently used audio files, any plugin binaries, etc will simply be in cache memory and accessed directly. Files being used are continuously synchronized back over the net to long term storage. You can also keep local copies on your own hard drives or permanent media as backup.
If you want to watch TV, you hook up your handheld to the monitor and stream data over the network to it. You might again pay per view, subscribe, or get free stuff. There will be live feeds of various sorts, but everyone -- including you, will be publishing your own intellectual property to be watched or read. It is, of course, served off your own secure server.
In any engineering project you have to consider the failure modes. An airplane that works perfectly except for when the tail falls off has a pretty hard failure mode, so you engineer your airplane with as much structural redundancy as possible, and test how well the plane can be controlled as systems failed. Ideally, all failures in a system are covered by overlapping contingencies -- if you lose the left flaps you can steer with the rudder to land with just right flaps. If the rudder fails, you can slew the plane with flaps.
In terms of preserving your 'stuff' in a few years it would be reasonable to have several discrete copies of the entire digital corpus of your life -- multi-terabyte hard disks aren't that far off. In general, you won't worry about it because server companies will have gigantic decentralized data centers with deep redundancy. If you want to go someplace where wireless isn't available, or work off the network for security, you download a working set of data into your handheld, or bring along a separate multiterabyte storage devices. When you get back on the net, you have a choice what you want to synchronize back to your net storage.
Your Internet Face
'Your Whole Life' (YWL) will be on the Internet, there's really no reason that your internet persona, your face can't be served right out of your central file store. There will be different levels of publishing data, just as there is now. The most public level will be like having a web page now. Anything you don't mind the whole world seeing can be accessed as a web page. You'll also have the option to sell digital content, either outright or per use. You can share with other people more privately by sending them an encrypted URL to the files you want to give them access to.
optic does research on peer networking, so he knows more about it, but in addition to the people you see every day, you're already a member of one or more communities that are mediated by the Internet. Internet connections ARE real-life connections; loads of people meet first on the internet and establish ongoing relationships with others either remotely or in real life. When you have ubiquitous access to everyone, new social rules will be made up as we go along. Assume you have your handheld, you could be able to access the Internet Face of everyone within proximity. People will sit in bars and look around at strangers with their handholds, search for references to them on the internet, common interests, etc. Stuff like orkut and friendster are kind of annoying right now, but the idea of adjacency of trust would be a valuable thing to have. People could choose not to expose anything about themselves other than maybe a picture and a 'handle' separate from their In Real Life identity, but they could give out a key that gives their place in a trust network. So you could sit across the room from somewhere and see a green/yellow/red continuum of how trusted they are by people in your common trust network. Sure, someone could mark someone really untrustworthy out of spite, but turnabout is fairplay, and given a sufficiently complete social web, you can swizzle up a pretty useful trust rating.
Every person an entrepreneur
A lot of work now has as its end product a purely digital form. Most art forms, short of sculpture, have some digital form protected by copyright, so there's no reason that individuals couldn't sell stuff directly to each other. Again based on social networks, shared interest, shared politics, individuals would be able to trade on their talents and trustworthyness to sell directly to others. Right now, big companies control media in general, but if you have a viable way to organize and access the stuff that matters to you, users will likely to do an end-around to find news sources not mediated by big financial interests. Big media interests will endure, but anyone who knows how to google now knows how to find all sorts of information about any subject; big media has to compete by providing better content than the freelancers.
When you sell something digital in this scenario, you have a continuum of ways you can sell. You can sell a one-time key to a file in your internet store, or you can sell a permanent key that gives the buyer permanent access to the file, by using the buyer,seller, and the file's encryption key. Now if you can access a digital file, there's no way to prevent it from being pirated; but you can make it inconvenient enough that it's not worth the effort.
Privacy is a huge topic, but I think people sometimes look at it backwards. Real privacy isn't something that you passively possess, it's something that you actively implement. If you don't want someone to know what you're doing you do your best to obscure it, or do it where no one is looking. The problems we have NOW aren't going to go away, but there's so much you can do to preserve your privacy -- use encryption, use hard passwords, sweep your house for bugs, sweep your computer for bugs, etc. In the end, it all comes down to who you trust -- if it's no one, you may opt completely out of the pervasive web storage scenario and preserve your own files physically on your own hard disks. If you're willing to trust an Internet Storage Provider, by looking at how well trusted they are in general, and by examining their privacy and encryption methods, then you have access to everything you need everywhere.
There can also be 'masks' -- the default one being your Internet Face, which points unambiguously back to you in real life. You could also create a mask -- an anonymizer which represents you, for example, your internet grocer or amazon. A current example from today is credit card companies that will issue you a one-time-use Credit Card Number for an internet purchase. This has the potential for mischief, and law enforcement might want to have a back door into your real identity, but I think people have the right to be able to avoid leaving a digital trail for their actions as long as they're not defrauding or harming others. Third party escrow of masks, open to subpoena and arbitration over abuse should be 'good enough' anonymity.
In essence, we already have privacy issues we have to consider carefully in our personal and financial lives. They won't go away, and there will always be a battle involved, but there's no reason not to embrace new technology and services, just because they present similar challenges.