The next iteration of the Apple TV (to relaunch as the iTV) was rumored to be a pocket sized device capable of serving up streaming media. Engadget notes that this mysterious A4 (16 GB Flash) device won't be able to serve up 1080p or 1080i video, but it may receive its own entry in the App Store for suitable television applications.
We've already had some insight into Apple's plans via universal remote compatibility and previous Engadget rumors detailing its $99 dollar price point and simple form factor. John Gruber speculated that the new iTV wouldn't be as tethered to iTunes as other Apple devices, but it looks like the App Store is going to play a big role as apps become consumable on our television.
A quick speculation: could you see developers designing games that could successfully compete with short Xbox & Playstation arcade titles? Don't get me wrong: this won't compete with full fledged console titles nor will the iTV replace consoles, but I could see the start of small consumable games taking on other platform's smaller downloadable titles. In all fairness, it would probably be in "addition to" rather than "in replacement of."