Valve employees were asked “What can we expect in Half-Life 2: Episode 3?” in a recent interview. The Half-Life 2: Episode 2 project lead David Speyrer answered: “We don’t know entirely what’s happening in the next episode, but we’re gonna figure it out!” he laughed.
He then further explained: “There are always things we want to do that we can’t because of the constraints of either the story or the arc we’ve laid out for the gameplay - or just time. So we shelve them and carry on. Ideas fly around here quite a bit, so we have this huge laundry list of things to try [from previous Half-Life 2 games] for the next thing… [Half-Life 2: Episode 3].” — Via PCzone
In case you’re wondering what will happen after Episode 3 is released in either 2008 or 2009. Developer Valve said it will be the last episode in the currently planned story arc, but it will not be the end of the Half-Life franchise, so Half-Life 2: Episode 4 or in a way Half-Life 3 might be entirely possible.
Artwork from Half-Life 2: Episode 3 — like the piece shown below — will be at E4All 2008 as part of the Into the Pixel exhibit that runs from October 3-5.
This concept art shows Half-Life protagonist Gordon Freeman within a large Citadel-like environment as an evil Combine Advisor hovers over his head.
(click on it for the full picture)

Here are the details…
TITLE: Advisor;
GAME: Half-Life 2: Episode 3;
ARTISTS: Ted Backman, Jeremy Bennett, Tristan Reidford;
PLATFORMS: PC, PS3, Xbox 360.
Perhaps this is the same environment where the 2007 concept art of the Aperture Laboratories ice breaker / research ship, the Borealis, takes place. The Borealis contained Aperture’s version of the teleportation technology (different from Black Mesa’s) but the ship was never commissioned and disappeared with all hands and parts of the dry dock from the shipyard, until appearing in the ice locked northern seas at the end of Half-Life 2: Episode 2.

UPDATE October 14, 2008: Valve marketing director Doug Lombardi has said in an interview with Kikizo that they “may [announce Half-Life 2: Episode 3] at the very end of the year.” Although he cryptically added it may take a while longer for it to come out, by saying that “The next time you play as Gordon will be longer than the distance between HL2 to Ep1, and Ep1 to Ep2.”
UPDATE June 10, 2009: Valve co-founder Gabe Newell was asked on the G4 TV channel why we haven’t heard anything about Episode 3 at E3 2009? To quote Gabe’s answer:
“I get a ton of email everyday saying why aren’t you talking about Episode 3? And there are very good reasons why we’re not talking about Episode 3, which I can’t talk about yet, but I will. So, I think there’s frustration there and I’m not somehow going to say that that’s not legitimate or length isn’t a concern or regularity. The speed with which these updates are coming out, people say, “Hey, gee, these episodes are supposed to be shorter and you take 25 years to ship each one.” So, I don’t wanna somehow dismiss those, or sort of throw them under - but I think we’re in much better shape than would have been, in terms of our ability to move stuff, technology, products, uh, forward faster by changing how, ya know, being different than, ya know, there was Half-Life 2 and then there was post-Half-Life 2 in terms of how we were approaching these things and yea, I think that we’re overall pretty happy without somehow dismissing the legitimate complaints that people should have towards us. But, we’re happy with that choice that we made.”
After Gabe was asked if we’ll hear any further details (or video) about Episode 3 by the end of 2009, he continued talking without giving an answer:
“Just so you know, the thing to me, that feels right, is the rhythm that Robin and his team are operating with. It’s like watching the reaction of that community, watching their ability to respond, looking at the quality of the work they’re getting with the length of those development cycles. They’re having a great time. And I think it shows on the other side, right? I mean, they were just giggling so hard when they were changing the buttons in the movies to say “leak video.” Do you remember the big screen with all the buttons? And they were like we have to put “leaks video” into that thing before we release it. They were just like cackling away. What should have been like, pretty demoralizing and stressful was for them, “Oh, this is no big deal.” So, yeah, people get the idea.”
Well for starters.. it’s left4dead 2 he is talking about, and they are spending more time on that project then on Episode 3. I’ve allways been a great fan of Valve and it’s games. But lately i’m starting to change my mind, since Valve is becomming like EA.. Many new releases but no decent content support. For example they released a patch for counter-strike after 3 or 4 years and that nearly ruined the game so they had to fix the patch again remove it to its original state.. so.. in 5 years CS only had in-game Advertisement updates and a anti-russian walk patch that had MAJOR bugs, now tell me.. they are spending an awfull lot of time on the Half-life fans huh?
And being called “EA” Is no compliment at all.. because those are the real money grubbers.