A multi-user host computer system comprises a host computer that processes applications and the desktop environments for multiple remote terminals. The host computer includes a terminal services offload processor to supplement the processing of the host CPU. For each remote terminal, the terminal services offload processor may improve the video and graphics performance and allow the multi-user host computer system to more efficiently support multiple users. The host computer may include a graphics processor that manages a virtual display for each remote terminal and provides selective updates of sub frame data. Where appropriate, the sub frame data is encoded and transmitted over the network to the remote terminals. Video data streams are also optimized by the terminal services offload processor and optimized for the intended remote terminals and their respective network connections. The terminal services offload processor may be implemented in programmable hardware and may be a separate subsystem or may also be used to perform other offload tasks.