Turns out that the secret title Retro Studios was working on is a Donkey Kong game, as the romours said. The game is called Donkey Kong Country Returns, and much like its forefathers on the SNES and N64, it has the same level of awesomeness and brilliance. The game looked nothing but fun, and gimmicky- typically Nintendo.
The graphics are great, and the game is a 3D side scrolling platformer. Trust Retro to do the classic series absolute justice and for Donkey Kong Country Returns to be one of the biggest titles of its year.
DK Country Returns releases for the Wii this fall. In the meanwhile, you can check out the E3 unveiled video below.