Its not really a rumor, its a possibility from Xbox head Neil Thompson from the UK. He's down to possibly use both formats on the Xbox 360.
One of the formats is going to win the battle. Just as the one between Beta-Max & VHS.
PS3 supports Blu-ray and Xbox360 supports HDDVD so its very possible that people gravitate to a certain system depending on what their video preferance is, or vice versa for their system.
"Whatever format wins it is highly likely we will offer a solution. The only debate is if you want to watch Blu-ray movies and pay the extra money for that feature. We prefer to offer the consumer choice."via[Kotaku]