Similar to the Sky TV Player available to Xbox 360 owners in Europe, the functionality would allow Xbox 360 owners in the United States and Canada to watch live television through the console. Furthermore, the source claims that the service would allow watchers to record live television on their consoles, much like a DVR or PVR.
Just last week, reports claimed that Microsoft and Fox were in talks regarding a dedicated television channel for the Xbox 360, specifying that it would only be available to Xbox Live Gold subscribers. Given all this (as-yet-unconfirmed) chatter, don't be surprised if official word arrives relatively soon. After all, E3 2010 is only a few weeks away.
[Update - 11:00pm CST] As commenter "Onward, to futility!" points out, January saw Microsoft announce the Xbox 360 would gain AT&T U-Verse IPTV functionality later this year. It's unclear if GameFocus is referring to this or something separate, though U-Verse reportedly won't allow the Xbox 360 itself to function as a DVR or PVR.
[Update 2 - 12:50pm CST] GameFocus has now updated its story, writing that "Xbox 360 users in North America can expect something much bigger than what was presented" when Microsoft detailed the console's impending U-Verse IPTV integration.