It was a 32GB Nexus 7 shipped in the 16GB version's packaging.
Starting on a personal note, I will happily admit that 16 GB of storage just isn't enough for what I want out of Google's Nexus 7 tablet. After HORN (1.74 GB), NOVA 3 (1.70 GB), Modern Combat 3 (1.47 GB), Mass Effect Infiltrator (796 MB), ShadowGun THD (735 MB), King of Fighters Android (653 MB), Call of Duty: Black Ops Zombies (382 MB) and other top quality gaming apps install and download their additional payloads, there's not much left for anything else.
Google not launching a 32 GB version of its Nexus 7 tablet from the start just didn't make sense given there's a market for that capacity, but the company chose to launch only its $199 8 GB and $249 16 GB models anyway -- likely so that customers weren't scared off by the larger price point. So far it's unclear as to what Google is referring to by including the candy cane Easter egg in the more recent Android 4.1 "Jelly Bean" OS, but it's probably not the 32 GB Nexus 7 that's currently making rounds in the rumor mill.
As reported last week, the search engine giant is preparing to launch a 32 GB version of its popular Google Experience tablet. UK retailer Carphone Warehouse reportedly first spilled the beans on this third model, showing the gadget in its inventory. Three additional listings reportedly appeared shortly thereafter, pricing the 32 GB model between $269 and $272. The price may be lower than expected due to a possible downgrade of the tablet's Bluetooth component, dropping from 3.0 to 2.1.
Now the 32 GB Nexus 7 rumor is solidified even more thanks to one lucky Japanese customer who recently received a nice surprise. He reportedly ordered the 16 GB Nexus 7 tablet from Google Play in Japan, but what he received was the 32 GB version wrapped in the 16 GB version's packaging. The storage screen, captured with a smartphone camera for some reason, shows a total space of 27.58 GB and an available space of 26.62 GB.
It's highly unlikely this Japanese customer faked the shot given (1) recent reports (2) you can get a clearer shot holding the Power and Volume Down buttons simultaneously. If anything, it was a mix-up wherever the Asus tablet is packaged, leading to one very fortunate Google customer on the receiving end. There's talk that this version will ship around October 24 which wouldn't be surprising given Microsoft is gearing up to launch Windows 8 and Windows RT.