Is the cheapest VPS too cheap?

So I was reading an article today and my eyes strayed towards an ad for a VPS server going for $4.95 per month. Now bear in mind this wasn't shared hosting which I have seen for $1 per month in many places but a full blown Virtual Private Server. It got me thinking whether or not it's going to be worth it to buy servers now for "serving" anything or if in just a couple of years everything will be running on mainfaimes again. Retrooooo to 1950?

When you think about it, before the IBM XT nobody really thought they could afford a computer even for their office and businesses always grabbed those big mainframes and had dumb terminals running to the big bad boy in a metal cupboard. Today these VPSes are becoming more and more like the dumbterms of yesteryear; while you may be sitting at an intelligent PC you are still just remote connecting to the processing power of the VPS cloud and you might as well just be sitting on a dumb console in many cases.

Now consider a few other seemingly random trends such as "google desktop" and "microsoft remote drive" and fast forward into the future where it seems plausible that all your storage and processing might be done outside your office or dwelling with all that control in someone else's hands. In return for that control the user might just get their VPS for free, financed by advertising and the sale of marketing data. But right now $4.95 is as good as it gets and without advertising.