Some new details about Intel's Larrabee project were published at FUD Zilla. The site claims the Larrabee will first enter the market as a professional solution but will also be launched as a high-end GPU for the gaming market.
This will definitely put a lot of pressure on Nvidia and ATI, but Intel needs to win the high-end to change peoples mind about Intel’s graphics.
Intel has traditionally been the worst gaming graphics chip manufacturer and Nvidia and ATI are simply doing a way better job, even with the integrated stuff, but Intel will have to change this in order to get into the discrete market.
Intel needs a Halo effect and Microsoft did it with the game, Apple is doing that with iPods and iPhones while Nvidia is doing that with its graphics cards. Intel is the next in the “Halo” line, come 2008.
Till now Intel's attempts at graphics weren't really impressive but I have no doubt that Intel will be able succeed in this market if they are dedicated enough.