Valve recently announced its intent to release steamOS, an open source project based on Linux, intended to bring gaming onto Linux. This push by valve is significant because it is challenging windows in one of its last remaining bastions of strength, that is gaming. The ripple effects of this announcement were obvious when both AMD and Nvidia announced that they would be improving their support for their graphics cards, just one day after the announcement of steamOS by valve. This announcement of valve, to base the software on steamOS on Linux is not surprising, as earlier it had announced that the performance of certain games on Linux was better than that of windows bench marked on the same hardware.
But steam machine is not just for a rigid console
SteamOS will be available to end users in an array of specifications. Lower end machines can just stream games that are on PC's to a television over Wifi for example. This setup requires one to buy a gaming PC on top of the steam machine. Higher end machines could run games that are native to Linux directly, this at the moment is limited mainly to indygames. There may be many more offerings in between. Valve has already confirmed that Steam Machines will hit a range of different prices and specs, catering to different players and their individual preferences. All of this adds further variation to the SteamOS platform.
The operating system itself (steamOS) will be free and could be downloaded from official repositories after the release. It will feature a console based input device (because its based on Linux, this may not be a hard requirement) that can be hooked up to your television to play games from steam at a considerably lower price than a console game. You could also install steamOS on a mac or PC as a secondary operating system.
An android for the gaming industry
Valve will not directly manufacture the gaming consoles, third party manufacturers will manufacture the steam machines. Consumers can buy the device from these partners, although there are roomers that a lucky few beta testers might get their hands on prototypes developed by valve. The pricing of these devices have not been announced. We can expect the pricing to be economical because of the absence of licensing costs and developers of games would have lower costs because of the absence of the need to buy software development kits, for example. This would commoditize the game development and deployment environment lowering the cost of ownership of both the act of buying new games and the console itself. The consumers would benefit a lot from this move into openness.
But there are many issues to be resolved. Google, which has seen enormous success with android requires third party manufacturers to follow its guidelines only if the manufacturer wants to integrate the Google app store into the device. So far we have not heard anything about such rules from valve regarding standardization, minimum specification,etc for a certified steam machine. These are issues that steam would need to solve pragmatically and these are tough choices to make.