So Valve has sort of announced the Steam Box. Basically, they will be providing a customized version of Linux that will work closely with their Steam distribution, and also recieve local streaming from your PC. The endgame appears to be to get developers to develop natively on Linux, to bypass Microsoft, who, with Win8 appear to be trying to pull an Apple, and control software distribution.
Will it work? It’s all going to depend on whether they can convinve gamemakers to do the extra work to develop for another platform. Their workaround of local streaming seems a bit kludgy. I can forsee a lot of difficulties. No matter what you do, it’s going to increase latency. Maybe not by much, but hardcore gamers are a picky bunch. If they are able to get enough developers to support it, then they should be able to outperform a Windows system, because they can customize the os, and chuck a bunch of stuff you don’t need. They also are going to have to significantly improve the graphics drivers available for Linux. You’ll probably be locked into one, or a few different choices on graphics cards, in order to ensure performance is up to snuff.
Overall, I’m cautiously optimistic that they can get the job done, but this isn’t something that will happen overnite.