SemiAccurate has broken the story, with sources close to negotiations between the two saying NVIDIA was being "arrogant". Heated discussions began when NVIDIA's graphics failed in a large number of MacBook Pros.
NVIDIA had previously said high failure rates on some of their processors, first acknowledged in July 2008, would not affect Mac computers. However, it seems that was a tad wide of the mark. In a terse statement, Apple said they had, "determined that some MacBook Pro computers with the NVIDIA GeForce 8600M GT graphics processor may be affected." They are offering free repairs to any Macbook Pro affected in the next three years, regardless of warranty.
Steve Jobs proudly revealed NVIDIA's presence in the unibody MacBooks last year when he unveiled the new line at a dedicated keynote. Now it seems Apple will be switching to Intel's offerings, having told NVIDIA to take a hike "for three or four years."
A new deal will need to be struck quickly. The new Apple OS, Snow Leopard, proudly boasts OpenCL tech which will use the graphics chipset to boost speeds across your Mac.