According to Xbox365, ATI Technologies announced yesterday that they have an agreement with Microsoft to develop new technologies for future Xbox products. It looks very much like this means that the Xbox 2's graphics processor will be done by Nvidia's biggest rival, possibly a result of ongoing disagreements between MS and Nvidia over costs of the original Xbox's graphics processor.

UPDATE: There's a much more detailed analysis of this situation including some rampant speculation, over at News.com.