The upcoming Windows Vista will be shipping with a technology called WinFX, which gives software developers (such as myself) a new set of interfaces to write applications against. These interfaces will provide new functionality and simplify some common programming tasks.
It has now been announced that WinFX will be called the .Net Framework 3.0. The .Net Framework 2.0 will still be at the heart of 3.0, however.
To summarize, .Net 2.0 + WinFX = .Net 3.0. From what I've been able to gather, all .Net 2.0 applications will be able to run unchanged under .Net 3.0.
After Windows Vista ships with .Net 3.0, Microsoft will be releasing install packages that allow .Net 3.0 applications to run under Windows XP and Windows Server 2003.
Once .Net 3.0 is released for these platforms, Digital Oxygen will start developing new applications to target the new framework.