The Steam Box would include a Core i7 CPU, 8GBs of RAM and an unspecified NVIDIA graphics card. The proprietary controller would feature compatibility with a "wide variety" of USB peripherals. There's even a report that Alienware had designed an early version of the system with the, and will be the basis for the Steam Box.
The Steam Box would also not only run Steam, but any standard PC game, and even allow rival services such as Origin and Good Old Games to run on the system.
The benefit of the PC-console hybrid would be obvious. Much like the hybrids of the past such as the Commodore 64 and the Atari computer systems, developers would have a standardized system which would be updated every three to four years. In addition, dev kits for a PC-console would be meaningless, and would obviate depending on a console manufacturer to ship out dev kits to them.
Also adding fuel to the fire is Valve's "", which will not only allow PC's to run on any size television, but CEO Gabe Newell has hinted that Valve might compete with Apple TV with it.
Valve has yet to comment on the rumor. Stay tuned.