Not that this rumor is really that surprising and actually in fact that a Nexus 10 tablet wasn't unveiled at Google I/O is more surprising than this rumor is. However, if you want a Nexus 7 tablet but prefer the large 10" tablet variety, you may actually be in luck.
According to a report over a Digitimes, Google has apparently put in an order for 10" touch pads from a company called Wintek. this is the same company that supplied the touch pads for Google's Nexus 7 tablet so the easy assumption here is that the 10" versions are for a Nexus 10 tablet. This doesn't actually mean that they are for a Nexus 10 tablet although it really does point to that.
Looking at the prices for the Nexus 7 tablets (8GB for $199, 16GB for $249) a Nexus 10 tablet could make for a very affordable large size device. Like all rumors, take this with a grain of salt but it does seems almost dumb if a Nexus 10 tablet wasn't made.