Ken Levine announced in an open letter on the Irrational Games website that they would be closing down and the "Irrational Games as [we] know it" will be winding down.
Ken Levine states in the open lead (see below) that him and about fifteen members of the team will be starting a new, smaller venture with 2K Games that will have a, "more direct relationship with gamers." Levine goes on to say, "it will be a return to how we started: a small team making games for the core gaming audience."
Levine did say that there will be some time between now and a little after the release of the final Bioshock Infinite DLC where the members of the studio will participate in a recruiting day where 3rd party studios and publishers can hold interviews with those being laid off.
Levine also said that the Bioshock franchise will now be under complete control by 2K.
See the full letter on the Irrational Games website or copied below.