I can't see much information about the Udacity course on building a search engine, which is the only one they seem to have released so far. I doubt I have the pre-requisites for that (although the site isn't even clear on that to be frank - fair to say that the website is at an early stage of development). The AI programme used a mix of video content with online quizzes and exams. Students could discuss issues with each other via a bulletin board. What seems innovative about this model is primarily how much that might seem basic to the whole university experience has been edited out, as you can see from this FAQ:
If you take out the teaching and the certification, there isn't all that much of the traditional university offer left, but equally the marginal cost of delivery approaches zero. It isn't clear to me what the Udacity business model is. Somehow or another the staff are going to have to get paid. Perhaps a philanthropic funding source is out there for a relatively small-scale project, but since Udacity is offering stock options as part of the benefits package, that probably isn't the route they have in mind...
Can online students interact with the professors?Yes, but not directly. Students can submit questions to discussion page, which will be ranked and the top questions will be addressed by Professor Thrun and Professor Norvig weekly.
Will students receive a Stanford certificate or grade for completing the course?Only students enrolled at Stanford and admitted to the course can receive Stanford credit. Online students will receive a statement of accomplishment signed by the instructors with their name and rank within the online class. See the course information for more details.
So two models leap to mind. One is the University of London International Programme where, as with Udacity, actual teaching is not part of the offer - you get a syllabus and examinations and you can pay others to help you learn if you want to. However accreditation is a key part of the offer here, which doesn't seem to be the case with Udacity, and fees amount to several hundred pounds a year.
My other mental model for this - one Udacity seems closer to - is the private training market, offering short, essentially unaccredited learning opportunities in specific skills areas. If that is the case, Udacity isn't really anywhere close to the existing HE market, but in carefully selected areas it could significantly undercut the current hotel-trainer-and-flipchart model that is still in pretty widespread use. What is less clear, though, is how this model really differs from a teach-yourself book.
So I conclude this development has little relevance to the future of Higher Education. Perhaps if I could see the business plan my lack of imagination would be cruelly exposed, but I suspect commercial confidentiality will spare my blushes for a little longer.