As promised by the Joomla! Production Leadership Team, Joomla!® 1.7.0 was released in July 2011 (6 months after the release of 1.6).
Both 1.6 and 1.7 are Short Term Support releases, and the next release will be a Long Term Support release.
For most people the upgrade from 1.6 to 1.7 will only one click, and most 1.6 Extensions should be compatible with 1.7
Joomla 1.5.x is a Long Term Support release, and will still be supported into 2012, but for new web sites, we will be using Joomla 1.7