si1enc3ed has acquired and distributed scans of the up and coming issue of PSM (PlayStation Magazine), which states, in much detail, that a new version of the PSP, PSP2 as people call it (that won't be the final name), is due for release not later than March '07. Following the footsteps of Apple and their "generation" setup for the iPod series, Sony plans to release the new version and discontinue the old version, essentially making 'first generation' PSPs out of date, but not an entirely different console.
The PSP2 is planned to have 8GB built-in flash, camera support, new UMD loading mechanisms, and a smaller form factor, but no other details have been released from Sony as of yet. Is this a smart move? Maybe and maybe not. But it would seem that annoucing the release in the start of next year this early in the so-called holiday season is a very bad marketing move. There's going to be a lack of PSP sales this winter, if the new PSP is publicized enough.