It's a binary blob created by the clandestine fuego hacker collective that bypasses hardware checks that valve does. Valve claims it's for antipiracy and stability measures, the collective claims they're fighting valve's illegal use of your computer power or something (I've never given them much thought... My idea is that if you don't trust a platform, you don't use it... You don't go around creating programs that fiddle with the platform's working).
So... Spacewar. Initially, fuego created it for the purpose of messing with steam. But that was the start. As you can guess, it didn't take long before valve started updating more frequently (or maybe they already did that? Hard to say), and it didn't take long before it became outdated. So newer versions started being created. Then it became flagged as a virus warning in some scanners, but with the many versions floating around the internet, it's hard to say whether it always was malicious or that someone else took fuego's code and tempered in things to mine bitcoin, use it as a Trojan or something. Of course fuego denied the antivirus warning claims on versions THEY created and acuse steam of making a false positive claim. I don't personally believe it, as they only really operate on the dark web (frankly: i don't trust them).
But then things got really weird. The idea of a binary blob is that it is a self contained program. It can be written to update itself through the net but it has to be recompiled manually. Even Trojans can't really'escape'the source code from which they were made. But spacewar has been reported to change itself in size and features (whatever those might be) overnight. Even on computers in a Faraday cage (completely separated from the internet). In other words: it's mutating. But not in the way computer programs normally do. Like... Programs have dependencies, or at least require moderator access. But user reports of the strange behavior, and i guess the dubious creation history, have found a sort of hype. Imho over absolutely nothing, but this is the internet: the moment someone makes a claim, someone will run with it.
It was around Halloween that the reports came in that spacewar does this 'change size and features' also when you just transfer the files from a windows computer to Linux (steamos on a steam deck in most reports), which simply is impossible.
Probably fueled by those reports, one dude transferred it to a secure kali Linux distro while running activity tracker or decompilation tools or something. Dude claimed he wanted to debunk the internet myth but instead found himself with something he'd never seen. Or so he claims.
Fuego has since distanced themselves from what appears like a Frankenstein program. Last I've heard, they just claimed it was written for windows. But because they reportedly released the source code when it was in early beta, what's now floating around doing things computer engineers say it's impossible can be anyone's program.
... Which (finally) brings me to this situation. Yes... How DID it end up on your hard drive, in your steam library? Honestly... With its history, it's probably one of these 'features' i mentioned in the story. You can probably just delete it, but with no idea what version you've got (and even if: it's forked and potentially rewritten so much that even the number is just a number) you might even end up making steam even more unstable.
Not the os, strangely enough. With all the spookines and gossip surrounding it, you'd think that it's like a virus. But nope... Afaik, nobody ever treated it as more than a curiosity. So... Do whatever you want with it.
... Oh, right. I guess i should point out that I've just made this all up. There's no fuego, no binary blob or anything else. But it's worth speculating regardless.