A thin client refers to a client/server system where almost all of the processing is being performed by the Server and the client simply enters the data and displays the data. The most common example of this is the Web browser. Adobe is now offering services where they are running the high-end graphics programs on their servers and the Chromebook is running the display/keyboard/mouse pad.
Until Html5 came in and has been fully supported, while you some local processing via Javascript and Java they were still limited in what they could without plugins. Html5 gets rid of most of the plugins (like Flash) and can still display videos and play audio files. Html5 also supports more local processing and keeping data on the local machine.

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