That device is based on the original XO-1 laptop, and unlike the XO-3 tablet largely uses the same components. It was announced a few months ago, and the early prototypes are circulating through some parts of the OLPC community (I missed seeing one at the Books in Browsers conference). OLPC is working on improving the touchscreen component, which is still rather buggy.
Plans for a tablet were originally announced in 2009, and in 2010 Marvell signed on as a hardware partner. While that partnership may not have led to the wundertablet everyone wanted, it did also result in a couple major hardware updates to the XO-1 laptop which improved battery life and reduced manufacturing cost.
The XO-3 was rumored to have cost $75, or at least that is what OLPC reported. Now that it is dead, I would bet that the actual cost of a production unit was higher than initially hoped.
I must say that today's news comes as no surprise. I had heard that this tablet was in trouble a couple weeks ago, and the only reason Network World beat me to the story is that I didn't move fast enough. (Oops.)
Do you know why it died? According to what I was told, no one wanted to buy it. That kinda limits the possibility that it will be manufactured. What's more, it sounded like no charitable foundation wanted to fund it, either. That kinda limits the possibility that even a minimal demo order could be made.
OLPC would have loved to have gotten this tablet into the hands of students, but without a major injection of capital there was no chance that would happen.