This is what Valve's Steam Machine prototype looks like

Valve's Steam Machine prototype is designed to fit right into a living room, both from a size and design perspective, so it's not surprising that it looks like a video game console, as seen in a hands-on report from The Verge.

According to Valve, the company produced its prototype in order to give prospective third-party hardware manufacturers a model for their own Steam Machines. The SteamOS-based computer is designed to fit standard computer hardware of varying specifications — for the 300 prototypes Valve's shipping to Steam users later this year, the graphics cards run the gamut from an Nvidia GTX660 to a Titan — into a console-size box that won't look out of place in a typical living room entertainment center. Valve built its Steam Machines to prioritize cooling, with plastic dividing the innards into separate zones for the CPU (vented out the top), power supply (out the side) and video card (out the back).

On the other hand, Valve representatives said the company will manufacture and sell the Steam Controller on its own. Valve arrived at the current form of the unique gamepad — which includes 16 buttons, a touchscreen and two circular trackpads with haptic feedback — after two years and more than a dozen prototypes. The company experimented with trackballs, but realized that in order for the unit to be all-purpose controller, developers had to "have control over the input experience through software," designer Greg Coomer told The Verge.

That's how Valve came to the design of dual trackpads flanking a touchscreen. The company wanted to include biometric sensors, but found that hands were a poor source of biometric feedback because they're always moving around. Instead, Valve managing director Gabe Newell hinted to The Verge that future devices from the company could integrate biometric sensors. The Steam Controller does have a gyroscope, and Valve will add motion control in a future software update.

Valve will reveal third-party Steam Machines at CES 2014

According to The Verge, using the Steam Controller for games such as Portal 2, Trine 2 and Metro: Last Light wasn't a bad experience; it just took some getting used to, since the gamepad was so unfamiliar. And there was no discernible difference in the games running on a Steam Machine or a Windows-based PC.

Valve, along with its hardware and software partners, will reveal Steam Machines for end users at the 2014 Consumer Electronics Show in January. The company expects those units to start shipping to consumers by the middle of the year. And Valve promised that it won't do something like make Half-Life 3, if it ever comes out, a Steam Machine exclusive: "It's against our philosophy to put a game in jail and say it only works on Steam Machines," said Valve's Doug Lombardi.