Rumor has it that they are...

http://www.theverge.com/2012/3/2/2840932/exclusive-valve-steam-box-gaming-console

I've written a small analysis of what we could be seeing from them at this years E3.

http://www.halflife2.net/2012/03/02/valve-is-attending-e3-2012/

Valve's name has been added to the E3 attendee list:

http://e312.mapyourshow.com/5_0/exhibitor_details.cfm?exhid=val9642&CFID=39912146

They will be in Private Meeting Room 501B.

What could they be showing? Dota 2 and CS:GO are in very public betas right now, so they're unlikely to be shown in a private booth.

A new Half-Life perhaps?

http://www.halflife2.net/2012/02/29/csgo-expands-beta-again-by-5000-players-train-video-action/

http://www.halflife2.net/2012/02/28/an-introduction-to-valvetime-net/

http://www.youtube.com/watch?v=ZhHweIXC-hI