Arrington provides more details about the CrunchPad and the photos on his blog. The CrunchPad is a thin 12" capacitive touchscreen tablet, powered by an Intel Atom processor. It doesn't have a hard drive, and boots straight into a custom WebKit browser that runs on top of Linux; the entire software stack has a footprint of just 100mb. It has no keyboard, but comes with a virtual one. The device is not meant for data entry, but for "reading emails and the news, watching videos on Hulu, YouTube, etc., listening to streaming music on MySpace Music and imeem, and doing video chat via tokbox".
The device is developed by several different people and companies. The prototype seen in the "leaked" (you're not fooling anyone, Mike) photos is developed by Fusion Garage, both the hardware as well as the software. It now uses a custom Linux implementation (instead of previous versions using Ubuntu) and comes with the aforementioned custom WebKit-based browser.
The device actually looks pretty ready; the software seems to be working, and the device itself also looks solid and finished. The packaging looks good as well, and they appear to have quite a few of them. Who knows, maybe the CrunchPad is closer than we think.