The Steam Frame is a “streaming first” headset - because the onboard chip is too feeble for a full onboard OS gaming support.

The Steam Frame has hardware similar or better than the Quest 2, which can run games natively on the headset so it will be capable of local rendering.

It runs SteamOS, which includes KDE Plasma (and so, would eventually include any merged changes such as this).

As to the capabilities, it can run the x86 Windows version of Hades 2 @ 1400p using the onboard ARM processor.

https://www.tomshardware.com/peripherals/gaming-headsets/hands-on-with-valves-new-steam-frame-headset-arm-powered-mixed-mode-device-uses-new-fex-translation-layer-for-traditional-x86-games

Valve’s engineers emphasized that the company sees the Steam Frame as a “wireless streaming-first device.” [...] But that’s not the only way the Steam Frame can game. The company also showed off the x86 version of Hades 2 running standalone (as in not streaming from a PC) on the Steam Frame. And the game ran just fine and looked good at what Valve reps told me was 1400p in a window inside the headset, which I could actually resize to something that filled a large part of my field of view.

“The magic trick is that the game doesn’t know it’s running on an Arm chip,” designer Lawrence Yang told me. The game may be designed for a Windows PC, but “it’s actually running on Linux, running on Arm.”

That happens thanks to Fex, which is an emulation layer, so that will almost certainly mean increased power consumption / shorter battery life.

The software in the OP has very low requirements compared to a game.

It is only rendering a few 2d planes with textures in an empty space with no lighting or shadows to compute and the 'background' is a static image. I would expect that to change to include pass-through video, which is also essentially streaming a texture onto simple geometry with no complex shaders.

You can see, in Linus Tech Tips preview: https://youtu.be/dU3ru09HTng?t=58 that they are displaying the Steam Library in a way that is very similar to the software in the OP.

It includes KDE Plasma due to being SteamOS, can run x86 applications natively due to FEX, and we have video of the actual device's output showing that it is rendering the same '2d planes with window contents in 3d space' as the software in the OP.

e: forgot the first part of the Tom's Hardware quote

But it's still a full fledged ARM computer running SteamOS including full desktop support. It's just a matter of time until you can put a mainline Linux distribution on it and have it do whatever you want.

My guess is that Valve market it as a streaming-first device because they don't have as many VR titles in their catalogue that can run on it as Meta has for the Quest. It's a safer bet not to rely on devs porting their lighter games to the Frame.

And if they do not manage to get Alyx running on it comfortably nobody will blame them because they never promised it in the first place.

But it is not an exclusively tethered device. Never was. It is a full on gaming PC. Just not one with the power to run newer games. But it's plenty powerful enough to run all of the Team Beef ports. And besides playing those and lighter flat games I will enjoy playing around with a fully functional Linux OS on a VR headset.