Mr. Newell mentioned that Valve's games were shifting to a free-to-play scheme. The Steam Box might be something like this: a Linux-based OS, some sort of runtime/VM, a game-writing API (Source-based API?) and an online, on-console marketplace. Whether the VM is Android or even based on Java at all would remain to be seen.
The basic Source (or successor) engine might be distributed built into the Steam Box, with expansions ranging from full-on games to amusing hats available for immediate purchase and automatic delivery. Probably some back-catalog goodies will ship with the box/be registered to your Steam account, too.