Doug Lombardi of Valve confirmed that there will be no Steam console, at least in the near future. Whether it is hardware made by another manufacturer or hardware made directly by Valve it is not a project they are currently working on, or at least talking about… yet.
Valve has had a Big Picture mode since the early days of Half-Life 1 to test their games on all types of displays. The current “prototype” is part of this initiative, and not a new thing.
Why do I say, “yet?” This is an idea that many were excited about and shows Valve that the desire might be there. This sort of thing is certainly a possibility, but not one for the present or even near future. Personally, I love Steam and am pleased with the way it functions, but if a Steam box got more of my friends on the service to play with me, I’d be all for it.