From the FAQ [0]: - What OS is Steam Deck running? SteamOS 3.0, a new version of SteamOS based on Arch Linux. - Will people be able to install Windows, or other 3rd party content? Yes. Steam Deck is a PC, and players will be able to install whatever they like, including other OSes. [0]: https://partner.steamgames.com/doc/steamdeck/faq
Arch Linux is amazing. The biggest surprise for me was that it's more stable than so-called stable distros, probably because the various packages don't end up drifting several months from each other when keeping up to date. Hopefully this eventually results in more user friendly Arch Linux installers. The learning curve is an absolute wall when installing, even after several years on Linux, but after that it's pretty…
Canonical doesn't have any reason to be friendly towards the specific features Valve needs to make SteamOS a thing, and Valve probably doesn't want to maintain their own fork of the entire Ubuntu distro.
Not to mention, a default install of Arch is tiny and minimalist. It's the perfect base to apply your own packages on top of without having to worry too much about conflicts with system packages, or anything else that might break between Ubuntu LTS version updates.
It means Valve can mostly have their own custom distro without having to do most of the work required to maintain a custom distro.
It also means Valve can deploy the latest package of something that boosts gaming performance (like some new graphics driver or whatever), again, without jeopardizing the core os. Arch is well known for being "bleeding edge" and getting the latest packages out immediately which is something gamers (the target audience for SteamOS) want (every single extra FPS matters, etc).