I think they want to appeal:
-People who liked to play indies on a portable (Vita/Switch until now), now they will perform way better and have way more on their device
-People who liked to play AAA games (Vita/Switch until now) on a portable, now they will perform way better and have way more on their device
-Users with a big PC/Steam library interested on playing their games on a portable
-Overall people interested on having a next gen console experience on a portable console
-Potential future game streaming fans who want to have PS Now/Xbox Cloud/Stadia/Luna/GeForce Now in a single device portable or connected to the tv
-Emulator fans who want to play all of them on a tv on an easy way
-The entire userbase of the non super cheap chinese handhelds
I think first they will try to appeal tech savvy early adopters with a premium product, and after some time once they can apply a price cut to put it on a decent Switch-like price level (the price for Europe is a dissaster as of now) then they'll go to compete against Switch (you'll even able to play recent Nintendo games here using emulators).
Does this machine allow other launchers/games/software to run things beside Steam?
If no is the answer then you have the answers of what Valve wants to achieve with this.
The answer is that as of now SteamOS/Proton supports around 75-80% of the games, but seems that they will highly increase this % in the new version they will release for the device. In case they aren't supported natively on SteamOS, which seams likely, you'll be able to install Windows on it and run there all your Windows stuff.
They better learn how to make Nintendo games then, Deck is not substitutable with Switch people don't buy Nintendo hw for specs they buy them to play Nintendo games. Your common or garden Switch purchaser doesn't expect their Nintendo console to play PC games.
I wonder if Valve has a killer game up its sleeve to release alongside this, makes more sense if Deck comes bundled with something like Portal 3 / HL3. Otherwise the whole "subsidise hw at launch to keep the price down and make the money back over the gen" is a tough tough model to make work without serious first party publishing game.
A killer game? How about all PC indies and AAA games running, without having to buy them again if you have them in PC and (for the small portion of them available on Switch) with a better performance than in Switch?
And using emulators, how about even the Switch games (or the entire library of all previous Nintendo devices?) running at better performance and resolution than in Switch? Even at 4K on the tv!
Think, this Holidays it will have games Halo Infinite, Forza Horizon 5, FIFA 22, CoD 2021, Uncharted 4 and so on at launch.