Bethesda Softworks have officially announced that they are working on the Shivering Isles expansion pack for Oblivion. Details and the first screenshots can be found here. The listed features are:

• Experience a branching questline surrounding the endless cycle of mania and despair.
• See a world created in Sheogorath’s own image, one divided between Mania and Dementia and unlike anything you’ve experienced in Oblivion.
• Battle the denizens of Shivering Isles, a land filled with hideous insects, Flesh Atronachs, skeletal Shambles, amphibeous Grummites, and many more.
• Find and wield new weapons and armor, or have new ones forged for you by the talented craftsmen of Crucible and Bliss.
• Explore a bizarre landscape filled with twisting, vast dungeons buried within the roots of the trees themselves.
• Unravel the mystery surrounding the endless cycle of madness and destruction that threatens to destroy the Shivering Isles.

Sounds quite promising thus far! We'll just have to wait and see whether it delivers.