According to The New York Times, Google CEO Eric Schmidt confirmed the tablet at a party, saying it would exclusively run Android. Other sources say Google has been covertly meeting with publishers of books and periodicals to provide content for the device in addition to Google's already substantial cache of books in Google Book Search.
Android has been tapped by many hardware manufacturers for future tablets, including the much-buzzed-about Notion Ink Adam (which features a dual-function screen that can be switched to an e-ink-type screen for reading or a normal LCD for everything else). Apple's shown that the way to create a successful tablet might be to scale a mobile device up, rather than scale a PC down (like HP's upcoming Windows 7 Slate), and Android is one of only three modern smartphone OSes out there (the others being iPhone OS and Palm's WebOS, both of which are proprietary and not open-source like Android).
But Google has already been working on another OS for low-powered netbooks and, possibly, tablets: Chrome OS. Chrome OS, a browser-based OS, was announced back in November, but we've heard very little of it since then. It's unknown exactly how well it would work with a touchscreen, but it's also becoming even less clear how it's going to differentiate itself from Android. Two Google OSes, both on tablets, would be more than a little confusing for consumers.
Mashable hears that HTC would be the hardware partner for this Android tablet, which makes sense--HTC has been Google's most reliable Android partner (even taking a lawsuit bullet from Apple for it), creating the Google Nexus One and their own HTC-branded phones like the Evo 4G and Legend.
Presumably we'll hear more about this Android tablet in the coming months, and likely we'll hear about Google's plan for books even sooner--after all, Google has faith in journalism.
Update: Reached via email, Google declined to comment.