As we've been working on bringing Steam to the living room, we've come to the conclusion that the environment best suited to delivering value to customers is an operating system built around Steam itself. SteamOS combines the rock-solid architecture of Linux with a gaming experience built for the big screen. It will be available soon as a free stand-alone operating system for living room machines.
Valve goes beyond just building a Linux distribution and grafting Steam on top of it. They are actually working very closely with hardware manufacturers and game developers, which has already resulted in graphics performance improvements. They are also working on reducing input latency as well as audio performance. In other words, they are very serious about upending Windows as the default PC gaming operating system.
In SteamOS, we have achieved significant performance increases in graphics processing, and we're now targeting audio performance and reductions in input latency at the operating system level. Game developers are already taking advantage of these gains as they target SteamOS for their new releases.
Valve also unveiled that it's working with the major game developers so that triple-A titles will be natively available on SteamOS. As for your existing Windows games - SteamOS will support game streaming from your existing PC so you can play them on your SteamOS machine in the living room (or anywhere else, of course). 'Hundreds of great games' are already available natively on Linux through Steam, too.
This is just the first in a series of three announcements, and it stands to reason that the second one will be a dedicated SteamOS machine from Valve. The third announcement? Well. It's got a three in it, so Half-Life 3 is pretty much confirmed.