For rentals, the concept of streaming them over the internet makes the most sense to me. Theoretically, an online rental company could offer virtually every movie and TV show ever made and there would be virtually no wait time. But that is in concept and that is theoretically.
As it stands, every rental model has its downsides:
With Netflix, you cannot be 100% guaranteed to get the movie that you want at a particular moment. Your #1 choice in your queue might be unavailable at the time of shipping and so you wind up receiving your #2 choice or some other disc that is further down your list. And, of course, there is the delay as you wait for your discs to arrive in the mail. The upsides are the massive selection (far greater than any brick & mortar store or vending machine) and the subscription model means that you can pay a very low price per disc - provided that you watch and return quickly. While, in a strict sense, there are no late fees, the "late fee" is basically baked into the subscription price.
With RedBox, the clear downside is selection. Only 200 titles and you cannot even be guaranteed that a particular title that you want out of those 200 will always be in the 700 disc stock. Upsides are the price and not having to wait on mail delivery and return. For the casual movie renter - who basically just wants the new releases and wants to be able to grab a quick movie rental whenever it strikes their fancy - RedBox makes a lot of sense! And casual renters are a huge portion of the population. Almost everyone enjoys watching a movie once in a while, but most people are not such regular watchers of movies that they would agree to a monthly subscription.
Between those two models, anyone who would have rented from a brick & mortar rental shop can basically be satisfied. The movie lover who rents a lot gets a lower overall price and a MUCH larger catalogue from Netflix and the casual once-in-a-while renter gets a lower price from RedBox.
Streaming movies over the internet has the potential to offer the best of all worlds, but as of right now, it is only potential. Renting movies via streaming makes little to no sense at all as it exists today, IMO. The catalogue is small - limited by the selection of titles that the studios are willing to provide in streaming format. And the price is outrageously high! Whether it be iTunes, Xbox Live, Playstation Store, Vudu, etc. - any rental streaming service that is offering a la carte, pay per movie style rentals is doing so at prices that are closer to brick & mortar rentals and, in some cases, are even higher!
But online streaming could be amazing. If the studios would open up and allow for basically every movie and TV show ever made to be available online, it would represent the greatest catalogue selection EVER. Streaming could also be made available under BOTH a subscription model AND a pay-per-movie model - satisfying both types of renters. The price can and should come way down to match the price per disc that we already enjoy from Netflix or RedBox.
Finally, there is the issue of quality. If you want 1080p, Blu-ray quality, Netflix and brick & mortar are still you best bets. RedBox might offer a few titles on Blu-ray, but the selection is pitifully small. This is the greatest hurdle for streaming. Microsoft might have promised 1080p streaming on Xbox360, but with a maximum bitrate of 8 Mbps and a high likelihood of lower bitrates much of the time, there is simply no way that streaming 1080p is going to match the quality of Blu-ray. Strictly speaking, the video resolution may be the same, but this is a much more highly compressed version, not to mention a complete lack of lossless audio possibilities.
But if bandwidth can be increased and compression algorithms can get even better, streaming still has the potential to eventually offer quality that is indistinguishable from Blu-ray in both video and audio.
For right now, all of these options serve slightly different markets, but it is interesting to watch as it all develops.
