It's just a cut-down PC. I'm pretty sure it's running Windows or Linux with a TV-out. They work hard to hide the operating system, booting straight into the browser/email apps.
Early on they tried to sell a scheme where the machines were sold dirt cheap and you were supposed to subscribe to their high profit internet service. However, people soon figured out how to hack the box, run Linux, and use it for whatever you wanted. When that happened, the company stood to see huge losses as peope bought their discounted boxes with no intention of buying their internet service. They tanked soon afterwards IIRC.