If Steam can get this out early enough so that it beat the next Xbox and Playstation to market, and if they can show it is capable of high-end PC experience at a fraction of the cost, they might be able to appeal to enough console people and PC gamers to sell it. Those are some VERY big IFS and I have doubts.

That said I don't think that's what they are trying to do. What I actually believe is this is more or less a concept device. I have seen some articles that Valve would welcome PC makers building their own Steam Box, presumably with Valve providing the software to make the whole thing work. I think they are attempting to be the Google Android of gaming. They are not trying to knock Sony, Microsoft, or Nintendo off a throne. The even said you need to buy a PC if you want a full PC experience. They want to revitalize the PC gaming market and ensure Steam's survival by creating a new type of device.

I am someone that use to play games on my console AND my PC. Once I got married, it would be hard to convince my wife to spend a fortune on a gaming right, especially when I wasn't sure I saw the value I once did. I would have fought for it if I thought it was worth it, but I was much better with dual analog sticks and the differences between console graphics and PC were harder to spot, especially with what I was willing to pay for a PC. I abandoned PC gaming willingly, and I wasn't alone. The market for high-end games on PC is not what it once was.

Something like Steam Box might be enough to entice myself and other like me back to PC gaming, but that probably won't be enough to start a revolution. I get what they want to do and why, but based on this forum, I think they have a very hard road ahead.

But then again you never know in this industry. The Wii and iPad were both devices that many people wrote off until it was apparent they had been wrong. The competitors to Wii from Microsoft and Sony took a while to materialize because no one expected the level of success. Also, the iPad got a big head start with almost no competition as well. There's always the chance Valve is holding an ace they haven't shown and will surprise everyone with something we're not expecting. I will say this: if it is more or less a Linux PC you hook to your TV for gaming without an ace in the hand, they had better have some masterful marketing planned.

(Even a Half-Life 3 exclusive would be a pretty good ace)

It is a competitive play. Gabe Newell is very concerned about the advent of Windows Store and Mac Store. The fear is that Microsoft will evenually only allow software from Windows Store to be installed. Apple has already done that with iOS and appears to be going that direction on Mac. Xbox, Playstation, and Nintendo all have their individual stores. The whole "walled garden" software distribution model seems to be taking shape everwhere. Gabe sees a world (in a not to distant future) where Steam is irrelevant.

Valve could realistically loose Steam everywhere but Linux. If PC gaming and Steam are to survive in its current form, Gabe believes it will have to be on Linux. Linux is the life boat. Gabe and Valve want to see Linux become the new Windows when it comes to PC gaming. They almost have enough power to make that happen, and porting Steam to Linux was a start, but something will have to entice developers. Enter Steam Box.

Who is the target market? Good question. Hopefully they'll have one, but ultimately it is a competitive move to keep Steam alive and kicking. If they launch it and make Half-Life 3 exclusive to Linux, they might be able to sell enough Steam Boxes, or encourage enough people to install Linux, so more developers consider Linux ports. It appears from the rumors that Valve would be perfectly happy working with todays PC makers. I forsee more than just a Valve built console/PC. I believe there will likely be some sort of Steam-centric Linux distro and development kit.

Ultimately I think the goal is to attempt to revolutionize PC gaming and make the Dells and HPs of the world start building hardware to take on, or provide an alternative to, consoles. Who will buy it is an after thought, but one they will ultimately have to provide an answer to.