Well the fact is since SteamOS is free it actually takes 100 bucks off the purchase price of a gaming machine.
You don't pay the cost of the OS on the current consoles, and usually consoles are sold at the price of manufacturing or a little less than that in order to drive the user base further as fast as possible. So a "free OS" is not going to change things much here in terms of pricing.
Then you have steam priced games as an attraction without the fuss of having a computer
Xbox live arcade of PSN games have low pricing as well, for indie titles. That is not very much different from Steam.
Then again if they have nailed the os and launch titles enough it could even take some market from Microsoft and sony.
To get market share from Microsoft and Sony you need AAA titles. Indie games are not going to cut it.
Who's going to make AAA titles apart from Valve if the installed user base is close to zero in the first year? No-one. Again, chicken and Egg problem. Users will not buy a SteamMachine either because these games are missing. No incentive.
I think this creates a big target for developers to create Linux versions. I am sure Valve will make installing the games as easy as possible. End users don't have to worry about extracting or which package type to download and the developers just need to worry about one flavour.
One flavor ? I don't think so. It's not going to be a single hardware. A single OS maybe but you will have to ensure your game works well with AMD, Intel and nVidia cards because manufacturers will make their own hardware around it. That makes it a bit more complicated for developers to ensure their games will run about the same for all hardware configurations on the market.
However Valve has announced they have developers on board and I think a few thousand games.
Few thousand games IF you already have a gaming PC with WINDOWS running somewhere in your house, and if you set it up to do streaming to your SteamMachine.
If you are a console gamer without a gaming PC, the actual number of games you are going to get on a SteamMachine is about 200, most of them (99%) being Indie games.
Again, I'm all for being enthusiastic and all, but I fail to see the actual value proposition that will bring new users, so far.