The latest issue of PCZone spills the beans on Shivering Isles, Bethesda's first true Oblivion expansion (Knights of the Nine was really just a lengthy quest). The expansion is set in a new realm, the Shivering Isles, a ruined land controlled by Sheogorath, the god of madness and dementia. Players must overcome the god's trials, and apparently, the god itself, ultimately seizing control of its domain.
The expansion will include new monsters and a series of branching quests, which allegedly expand Oblivion's freeform gameplay. The description implies that players' decisions will have various visible affects on the transformation of the Shivering Isles.
Bethesda has not yet announced the forthcoming expansion, but PCZone suggests a Q2 2007 release window. We assume that, as with all added content to date (barring player mods), Shivering Isles will also be offered for the Xbox 360 and (impending) PlayStation 3 versions of Oblivion.