The devices are called Open Web Devices, and are built entirely using HTML5 and other web APIs running on top of a Linux kernel. The project is entirely open source, and in line with Firefox-proper, updates will be taken care of by Mozilla itself. Other than Telefónica, Deutsche Telekom will also be supporting the project. Qualcomm is involved on the hardware side of things.
As you can see, Boot To Gecko is not yet competitive with existing platforms like Android and iOS, but since they're still in a relatively early state of development, that's to be expected. I'm still amazed all this is possible with HTML5 and related technologies, so I'm very interested to see what untapped potential HTML5 has for mobile computing.
"Telefónica's objective is to drive HTML5 adoption across the industry. For the first time the capabilities of HTML5 and the open Web have been fully leveraged to create an entirely new mobile platform," said Carlos Domingo, director of product development & innovation at Telefónica, "From our experience in Latin America we know that a huge part of the market is not being catered for by current smartphones. With new open Web devices we will be able to offer a smartphone experience at the right price point for these customers."
Adobe is involved as well, and supports the entire project. It's easy to see why - Adobe missed the mobile train because Flash wasn't part of it, and now that the company is transitioning to supporting HTML5 and related technologies, it makes sense for them to promote their use in mobile.
Things are moving fast for Mozilla, and the first device - most likely developer-oriented - will become available later this year.