Back in August, some coders decided to have a peek at the many lines that make up the Source Filmmaker and discovered some references to a Source 2 engine. Valve didn't confirm the subject at the time, but recently co-founder Gabe Newell has: Source 2 is in development.

Some 4chan members recently visited Valve's headquarters to deliver Newell's 50th birthday cake and also question the boss. Various matters were discussed, but the biggest one was in relation to the new engine. Newell confirmed Source 2, but said the studio needs a game to go with it:

We've been working on Valve's new engine stuff for a while, we're probably just waiting for a game to roll it out with.

Now, like most people, you're probably yelling at the screen to release Half-Life 3, and that'd be a very fair assessment. Newell did confirm that Ricochet 2 is in development, which has been jokingly referred to in the past whenever mention of HL3 surfaces. So, maybe we'll be getting Half-Life 3 on Source 2 or maybe something else, like Half-Life 2: Episode Three.