Valve engineer just let the cat out of the bag:
http://www.neogaf.com/forum/showthread.php?t=506899
The console is being called "Steambox" for now. No idea if that will be the final name for it, or not. This will be a console which hooks up to the digital Steam store.. This will be great for those of us who do not play PC games too much. I'll finally be able to play STALKER and Last Remnant.
The interesting part is that it will be using Linux OS instead of Windows (since Gabe Newell views Windows 8 as a disaster, lol). Supposedly Valve are also working on Augmented Reality and Virtual Reality projects too. Let's see what happens at E3!