According to Gizmodo, it's a real device, and currently somewhere in the late prototype stage of development. It has two 7" touchscreens interconnected via a hinge, and supports both finger and pen inputs. You can flick stuff from screen to screen, and do all sorts of other fancy tricks. This video is pretty amazing:
So, where does this project come from? It's been gestating inside Microsoft for a while now, and just like the Zune and XBox, Microsoft is collaborating with another company for this one. The user interface is clearly something we haven't seen yet, and incorporates features from zooming interfaces as well as Microsoft's Surface project. However, there's a whole lot of cool new stuff in there as well. The hinge, for instance, can also serve as a 'pocket' for items you're moving between the two screens.
So far, it's not very clear what the prospects of this project really are. Gizmodo speaks of late prototype stage, with Microsoft currently developing the user experience (it's never an interface with those guys, is it?), but Engadget, who didn't have the scoop, says it's just an "advanced proof of concept". The truth is probably somewhere in the middle; Gizmodo wants the scoop, Engadget is annoyed it didn't have it.
In any case, it looks like a very interesting device, so I'm hoping it will indeed get to market. If it will, this is some serious competition for Apple to deal with.