I saw this on ValveTime's Facebook page. There is some code hidden in Source Filmmaker that alludes to the Source 2 Engine being development.

http://www.valvetime.net/threads/exclusive-next-gen-source-2-engine-is-in-development.215336/

He's found many more references to a "Source 2", but not just one vague line like our previous entry. We're only one file deep, and already it's clear that the references to "Source 2" are indeed referring to a next-gen engine that Valve is currently developing. I'm only going to show one line in this post, but there are about 60+ references here, and this one line is probably the most telling.

The Pastebin & file path:

".../SourceFilmmaker/game/sdktools/python/global/lib/site-packages/vproj/vproj.py"


Line 1387:
'''Return an str with the current engine version.
If key doesn't doesn't exist, assume 'Source', otherwise invalid -- assume next-gen 'Source 2'.'''

I guess we all knew that Valve were working on their next-gen engine, but it is nice to see some concrete proof of it. Valve really upped the ante in the physics department with the Source engine, it will be interesting to see what new things they will bring to the table with the next iteration.

The way it's written is like the developer was thinking of a likely future scenario, rather than anything actually being hinted at...