Chumby is a hackable Internet appliance/clock radio that is made up of a small 3" touchscreen unit that's housed inside of a bean bag. Through various widgets, the device can playback Internet radio stations, NY Times news in pictures, weather updates, Flickr photos, etc.
The next logical step for Chumby is to step it up to a larger screen. So, it is only natural that they would make it work on a digital picture frame. They'll no longer have to waste their time on hardware/manufacturing and just let the likes of SONY and SAMSUNG handle it.
Sony made their partnership public during CEO Howard Stringer's :
keynote speech
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