From the original post on Macrumors.com:
The rumor originated at The Wall Street Journal:
The report, citing two industry executives with knowledge of recent discussions between the companies, said Apple will agree to use Intel chips.
Apple has seriously considered switching to Intel at least twice in its history. One previous project code-named Star Trek actually ported Mac OS 7 to Intel based hardware in 1992. Most recently, internal IBM documents noted that Apple considered switching to Intel but felt it would cause too much trouble:
Apple believed that using Intel would deeply affect its current customer base. Using an Intel architecture might solve Apple's short-term megahertz dilemma, but customers would have to suffer through a slow transition from PowerPC over the long term.
Such a switch would traditionally require recompilation of applications, [recent] rumors have suggested the use of Transitive Technologies' software which claims to "dynamically translate and accelerate binaries" up to 80% performance matching, as well as unconfirmed reports of x86 seeds of Mac OS X 10.4 (Tiger).
Apple no longer owns a stake in ARM (sold it all to Intel), but they do have experience and could easily hire/rehire programmers that worked on Apple/ARM devices (read as Newton)
My guess is that this will be for a new ARM processor for the iPod - the custom chip is probably too weak for advanced features.
Intel has been wanting to move to RISC chips for some time - maybe they want to become a CELL/PowerPC production partner to catch on the wave - 100% of the gaming world will be using PowerPC or PowerPC deritives in the next year - year and a half -
Intel now owns the largest stake in ARM (bought from Apple) - this is the processor in the majority of PocketPCs, Palms, and GPS units. So - this Intel processor is most likely for a new device or even the iPod.
Also take into account that USB2.0 chipsets are currently made by Intel (and others) and that Apple uses Intel chips in the XServe line for RAID I/O.
As I read up in other forums about this topic - another intriguing possibility pops up ... Intel is the developer of WiMax technology - this would be the perfect continuity for the iTunes, iPod solution as WiMax is being pushed heavily as the broadband for the rest of us!
Of course, then there's the business strategy angle:
Apple may be putting heat on IBM for pricing & production concerns to get IBM's attention. Leaking this to a market analyst with a big mouth and big ego is an easy way for a story like this to get press.
Here is a post I made to the Engadget forums about this topic:
Intel developed WIMAX - they make the chipsets for WIMAX ...
Apple needs to expand the number of users that have access to the iTunes Music Store
They also need to have a broader base of users with broadband before they could launch an iMovie store
WIMAX is touted as broadband for the rest of us - it's the broadband that will go the extra mile and twice as fast as cable modems!
I see Apple jumping on this early ... just like they did with Airport - calling it AirportMAX and announcing a partnership with INTEL for a huge nationwide deployment - BOTH companies have the cash to fund this.
[UPDATE II] As always, Daring Fireball's John Gruber can say it better than me. Thank you for the readers that pointed this article out.