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Rumors about this thing have been floating around for a few years now. While it's possible, I don't think it's very likely The tablet market is already quite saturated and I don't think Apple has anything they want to particularly add to it.
It doesn't make any sense for Apple to do this. They're already in portable media markets, and they're doing exceptionally well. I expect if Apple made a product like this, it would almost immediately fall by the wayside and become a niche-product much like the Apple TV.
I think this rumor will continue to float about for quite some time, but I don't expect to ever see a tablet from Apple.
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