From what I've read SteamOS is going to be a free standalone OS that you're free to customize and install on any device you want. The Steam Machines Valve will be selling aren't consoles under lock and key, they're just PCs with a form factor more fitting for a living room. SteamOS is supposed to have the ability to stream Windows games from a running Windows box with Steam installed as well. Their new controller, while not likely to completely replace the keyboard and mouse looks pretty promising too. I wouldn't expect them to drive all gaming to controller / console style games.
