It's not really like Smash TV. It's more like a mix of Left4Dead and Aliens (the film). It's made by two guys, who are part of Valve, and as short as it is, there is hidden code that shows a lot of plans that are in the works for this.
Right now, the campaign is the same every time, which is why they have given all the development tools straight away for people to make custom campaigns, but if you put in the right commands, you can get the AI Director from Left4Dead2 working. It's unbalanced at the moment which is why it's not a proper feature, but the tech is there so I'm guessing it will be applied fully later on.
As well as this is a tile based level generator, meaning procedurally generated levels created in the same amount of time as any other level would take to load. And it will always be different...
Now if we put both together, we could have alien swarms AND level design controlled by the AI director who bases its decisions on the performance of the players, in order to get the most dramatic and exhilirating result.
I think, as it is right now, it's a great free game, with more depth and sophistication than most retail games of this genre provide... but what seems planned for this, could make it the best free game ever.
And the weird thing is, this was a small side project. Valve pretty much made this in their spare time. Its practically just showing off, that they can make this almost on a whim... although granted it did take two years but at the same time the two guys working on it were working on L4D2 and the Portal2 co-op campaign.