This is the big news Sega had planned. A snippet from the article at IGNDC:
This is perhaps the reason why many rumors have been flying about the demise of the Dreamcast. Hardward production of the Dreamcast will decrease, but not because SEGA is “pulling out of the game”, but rather to make room for this new product. Though no specific details have been revealed, this new set-top box will incorporate a hard disk drive planned to have a size of 40 GBs or larger. With the digital platform of this new device, SEGA and Pace are planning to provide downloads of hundreds of SEGA titles – Dreamcast, SEGA Arcade, and perhaps even old SEGA console titles – right on the spot. With the digital format, this set-top box will also allow games to be transmitted wirelessly on to portable, hand held devices. Additionally, it has been surmised that this new console will have “TiVo” like TV features and it has been rumored the device will incorporate DVD features as well.
You can read the full article at IGNDC here.
Source: IGNDC