That's what the Inquirer overheard at the Austin GDC. One Blizzard employee asked another what they were working on, and the overheard reply was "I'm working on Hydra."
So now we have an internal name for Blizzard's third project. Let the speculation begin. I'll start: the Hydra is a creature from Greek mythology, so maybe we're looking at a Diabloesque game set in Greece? Like Titan Quest (which is really Diablo anyway) or God of War, but made by Blizzard? And Hydras also appear in World of Warcraft (notably in BFD, where a Hydra is the final boss), so could it be possible that this is actually another WoW expansion, maybe the Maelstrom expansion we've been waiting for?