It's pretty cool actually. There will be two modes.
Tethered mode - wireless via a specialised USB dongle
Standalone - the thing runs an arm version of SteamOS, and uses FEX for x86 emulation alongside Proton to run full PC games
Nobody knows exactly how it will perform, but they put in 7 years of work to make this emulation layer functional. So all bets are off for the next Valve hardware for what kind of chips will power them.