Well, I'm sure the members of the studio will be taken into other great studios, such as 2K games (which did BioShock Infinite), and I hear Ken is moving to other, greater projects.
I found more on this here:
http://www.overclockersclub.com/news/35496/
Honestly, this isn't "the end" or the "doomsday" of gaming that some people think it is. It's just one studio closing it's doors, and it's the beginning of a new cycle. Hopefully, it'll be a game studio even better than Irrational was, with hopefully even better franchises and games from them. And I think BioShock has found as good home with 2K games, actually.
I'm hopeful we'll see even better stuff in the future. With great, epic games like Kingdom Come, Lichdom, Star Citizen, Titanfall, Destiny (for PC - hopefully), The Witcher 3, Cyberpunk 2077 and many more on the way, it's looking like 2014 and 2015 will be absolutely epic for gamers who have been hoping for a breath of fresh air from the way-too-overdone "military FPS" genre, the older-than-dirt "medieval fantasy (with magic!)" genre, and the obligatory "steampunk fantasy with not-magic-but-works-the-same-d*mn-way" genre.
Now that we're getting great technologies and finally some new AAA game titles that look great and have new, innovative mechanics, we're going to be seeing some really epic stuff. The gaming industry has been stale for way too long, and I think we might just get that breath of fresh air we've been hoping for. With technologies like Mantle, and new (more affordable and more power efficient) power supplies in the market, we're going to be seeing a lot of really great stuff that'll enable Game Devs to make the games we want, with the graphics quality and audio quality (*cough, TrueAudio, cough*) we've been dreaming of. So I think there's a lot more reason for optimism than all the doom'n'gloom I've been hearing lately. =)
Also... what would happen if Ken Levine joined forces with other great game studios, even if as nothing more than a consultant to help create more immersive storytelling within games? It could really work out nicely for the industry.