The CPU and memory is limited in the Cloud, So where is the scalability?

Solution 1:

It's called horizontal scalability (or, scale out). You don't add more resources to your system (vertical scalability), you add more machines to your system, and load balance it.

The advantage is being 'elastic', that is, when you get hit by high traffic you automatically deploy more machines to handle the load, and in times where the traffic is small you remove machines from it. So you end having lower cost on the end. That's why cloud resources are billed differently (you pay what you use, not what you 'own').

This is a great talk from the Lead Architect on Ebay talking about cloud computing as a whole and its impacts. It's big, but it's GOLD to understand what's going on :)

Solution 2:

Cloud is that the limit you are talking about can be easily increased. If you are not cloud in order to increase limits you would need to do a LOT of work.