MS just announced two new versions of the .NET framework, and everyone I've talked to is completely confused by what that means. In fact, just about all the MVPs I talked to were similarly confused, so luckily, we got a little clarification. Here is the breakdown as I understand it now:

FX Version Ships with Includes CLR Version
2.0 VS 2005 (uses VB 8, C# 2) What you have today 2.0
3.0 Windows Vista (uses VS2005, VB 8, C# 2) Framework 2.0 + WCF, WPF, WF 2.0
3.5 VS "Orcas" (uses VB 9, C# 3) Framework 2.0 + WCF, WPF, WF + LINQ 2.0

So basically, FX 3.0 will ship with Vista and simply adds WCF (communication foundation/indigo), WPF (presentation foundation/avalon), and WF (workflow). All these components are written using Framework 2.0 and use the CLR 2.0.

FX 3.5 will ship with the next version of Visual Studio, and will (for the most part) add LINQ. It is also uses CLR 2.0.

The confusing part is that unlike 1.0 -> 1.1 -> 2.0, these two new framework versions don't actually change the framework, and the runtime is exactly the same. The team is simply adding new features to the existing framework. And that's perhaps the biggest point of confusion, because in my mind (and the minds of many others), this doesn't warrant a new major version number... made more confusing by the fact that the underlying runtime will continue to be 2.0. If anything, these new versions should be 2.1 and 2.2.

Anyway, hope this helps.