Steam Machines have a lot of potential, they can still do the things a regular PC can do. Looking at future MS alternative.

With the rise of mobile and tablet apps, and mobile productivity it seems the psychological barrier for people regarding where and how they work has changed a lot. People now will be I think much more receptive to PCs in the living room, for games and other things.

For a long time this was a taboo. The failure of the Amiga, and other keyboard-toting pc/console type machines in the early 90's made it so console makers went to great lengths to separate their product from anything resembling a "PC". If you ever wondered why we never saw a KB/Mouse (even for MMOs), let alone any apps (even email) on the original Xbox this is why. Its not that MS was just lazy, they even explicitly forbid any third party from doing or making anything that might hint at the fact that the Xbox was a PC, lest it go the way of the Amiga, 3DO, etc.

Obviously times have changed, though MS is behind the curve Sony for once, and Valve are not.

It will take some time, but expect Steam Machines to start becoming a "thing" in 1-2 years, spearheaded by "Dota boxes" - inexpensive relatively low power machines at around $200 that play MOBAS, some MMOS, and non high-power FPS games. Expect various social and productivity apps to follow (where they dont already exist, and be sharpened up for ones that do), and expect Windows to have tanked in the home market in about 5 years.

For who could be free when every other man's humour might domineer over him? - John Locke (2nd Treatise, sect 57)