This marks the end of the road for the good old 3GS and the move was largely expected, as the 3GS' hardware is not up to the task. The iPhone 4 however will get the iOS 5.0 update.
The new iOS variant is expected to feature numerous improvements and new features and observers believe it will be one of the main selling points for the upcoming iPhone 5, or 4S if you like.
More here.