Conversation pit, or sunken living room. We had family friends in Woodcliff Lake, NJ with one of these. (This one is a bit more famous, being designed by Eero Saarinen as part of the Miller House in Columbus, Indiana.)
This is proof to me that some styles just *aren't* for me. This retro 70's "groovy" home style is definitely not my style. This photo makes me want to grab a sponge and some bleach and start scrubbing the walls. We won't even talk about what I'd like to do to the carpets.