Speculation that Bethesda is creating an MMO based on the Elder Scrolls world has been unofficially confirmed via documents made public in a court battle the company is having versus Interplay. The court battle is regarding the Fallout trademark, which is mostly unrelated, but nonetheless documents used in court did reveal some interesting info about the new Elder Scrolls MMO.

The leaked facts are that the game development started in 2006, there is a team of about 100 people working on it, and there has been an investment of quote (from the documents) "tens of millions of dollars".

The news of a Bethesda MMO comes as no surprise since Zenimax, the parent company of Bethesda, received a $300 million venture capitalist investment back in 2007. This, as the 'Zenimax Online' division opened simultaneously.

We now know that the Bethesda's MMO baby is indeed set in the Elder Scrolls universe.

Links:
“Secret World of Warcraft type MMO” in development at Bethesda
Video Game Creator Zenimax Media Gets $300 Million Investment