It's not yet sure what form the device would take however there have been confirmed reports to The Wall Street Journal that Google employees have been testing out prototypes of the system.
Speculation has hinted towards a portable device which would use Motorola hardware and act as a hub for all Google-connected devices in the house, including Google's recently announced Google TV.
With Ice Cream Sandwich now available for both tablets such as the Asus Transformer Prime and also for smartphones such as the Galaxy Nexus Google is presumably trying to get to a point where it has an operating system which will run on all devices including TVs and Laptops.
Source: Telegraph