At writeLaTeX.com, we compile automatically, typically every 5s-10s. One of the things that makes it work is that the server can cache most of the stuff that doesn't change often, such as the figures. This does require a bit more sophistication on the client end than just uploading all the inputs for every compile, but it's definitely possible. In terms of packages, we run a full TeXLive distribution on the back end, which covers most things. (But we still have to install CTAN packages on request from time to time.)

As mentioned on HN (https://news.ycombinator.com/item?id=5537273), this is something we'd be happy to support on writeLaTeX (https://www.writelatex.com). I should also point out that there is a fairly well-established protocol for online latex compilers, namely that of the CLSI (https://github.com/scribtex/clsi), which is maintained by jpallen at ShareLaTeX. So, it should be straightforward to do this in a vendor-neutral way.

Thanks - and sorry you found the site down once, that's one more time than we're aiming for! At the moment the decision on preview updates is fairly simplistic, but we're continuously updating things behind the scenes to make it "cleverer" :-) We've also had requests from some users to be able to turn it off (so they can decide when to update), which makes sense, and we've lots more options/tweaks to add to the UI. In fact, this weekend we've finally finished a package of updates on the front end, which we're aiming to roll out very shortly - so when you check back next week you should see a couple of handy improvements!

I'm one of the developers. Your speculation is correct! but we are working on a converter. Thanks for the feedback :)

Thanks for the comments - accepting .eps files (and some other improvements to file management) are on our work-in-progress list (I'm one of the developers at writeLaTeX). We've been rolling out updates fairly regularly, and so the site will continue to evolve and (hopefully) improve over the coming weeks and months.

I'm one of the developers. We use pdflatex on the back end, so you're right: eps files aren't yet supported, but we are working on a converter. Thanks for the feedback :)

Thanks to Timothy for posting about writeLaTeX on here - I'm one of the developers and just got in from my Valentines day meal out to see the post! It's great to see the whole cloud-based LaTeX community taking off (as others have pointed out, there are lots of options out there for online LaTeX editing) - we've done a lot of work with the guys at LaTeX-Community.org and TeXample.net to allow all of their LaTeX examples to be opened in writeLaTeX with a single click for editing and sharing - we hope this is helping new and existing LaTeX users work together more effectively. Thanks for all the feedback - more to come from us soon, so we hope you like what we've done so far :-) John

Thanks - we've designed writeLaTeX to make it easier to collaborate especially with users who are new to LaTeX or used to WYSIWYG editors. (I'm one of the developers of writeLaTeX and have just returned from my valentine meal out to find us on slashdot!!) Hope the site has been performing ok during the spike in traffic, and if you've any questions just let me know or contact us through the site. Any and all feedback appreciated! John