I struggled to get it for a while, but it seems to me to be a way of dragging PC gaming away from its Windows reliance and to counter MS moves to take control and close the Windows ecosystem through the Windows Store in Windows 8. With the Windows Store MS has taken its first steps towards making Windows a closed system, which would be highly damaging to Steam's ecosystem and Valve. By releasing an OS (Linux-based though it is) and encouraging game developers to develop games for it (and by association Linux) it will force MS to either keep Windows open for gaming or force MS to concede control of the PC gaming market.
As for the hardware, its just a PC with very little configuration containment, which is intended to keep the hardware cheap and not alienate PC users who are used to having a wide control of what hardware they have. I do wonder how it will go as a 'console' competitor given the large variation in hardware available which I fear will remove the ease-of-use of traditional consoles.
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