It's a reference to the gnome in HL:EP2 I believe. There was an achievement for carrying it through the entire episode and then inserting it into a rocket which is launched to the moon if I remember correctly at the end of the game. Fun stuff, never did it though.
They also have gnomes in Left 4 Dead 2... same deal gotta care it to the end on the map... and COD MW2 had gnomes in its trailer park map that you could break by knifing shooting or blowing up.