Wizards Research & Development held a press conference. Reports from the conference are out from EN World user ashockney and EN World admin Michael Morris. You can read the reports for yourself at those links, so let me give my (epic length) commentary:
As I’d suspected, Mike Mearls of Iron Heroes fame is working on 4e, and it seems he’s been lead developer since April. If you do the maths and count back, you can find Mike’s response to when he found out he was working on 4th edition.
There are some other blog posts of his which are suddenly interesting in retrospect: discussing the RPG industry downturn  , PDF publishing, and the Open Gaming License   and freelancing, while carefully deflecting fourth edition rumours and perhaps hinting at Gencon 2007.
Some more information has been revealed. The number of core races and character classes has been cut down, with some classes merged – ranger will merge with scout, and rumour suggests the same with wizard and sorcerer. D&D’s historic Vancian spellcasting system (spell preparation) will be retained, although a spellcaster’s magic will be split between at-will, per-counter or a per-day basis. Magic item creation finally returns to second edition simplicity – no item creation feats or XP costs, and even magic item pricing guidelines are getting the axe. Creating a new magic item is once again a special occurrence that any spellcaster can attempt.
Preliminary covers are out for the core books, with 3e’s pseudo-constructed finish superceded the fantastic art of Wayne Reynolds. The Player’s Handbook features an old male tiefling mage and what I think is a female elven fighter, while the Dungeon Master’s Guide has a red dragon and the Monster Manual an epic-level encounter, Orcus.
Setting-wise, Greyhawk fans will find that their special status as the implied setting of 3e has not carried over into this one. D&D’s default setting is now an unnamed setting, and the Greyhawk pantheon is replaced with the DM’s choice of homebrewed religions or popular mythologies. I like this. You will meet clerics of Lugh, or warriors who revere Thor, or encounter the worship of the DM’s own Nalost, The Sharp Hunter. However, the named spells (Bigby’s, Mordenkainen’s, Tenser’s) and the big name powers (Vecna, Tiamat, Asmodeus) will still make appearances.
If we didn’t know it already, it’s now official that huge improvements from Star Wars: Saga Edition and Mearls’ Iron Heroes/Tome of Battle will become core rules in the new edition of D&D. We can surmise from Saga Edition that feats and class abilities are replaced by flexible Diablo II style talent trees, and Skills have been consolidated into straightforward groups – finally, Hide and Move Silently are a single skill, while rubbish like Profession and Use Rope has been discarded. Double-fistfuls of dice are no longer required to roll attacks at high level, critical threats automatically confirm. From Iron Heroes, we can expect to see an emphasis on “action fantasy”: melee fighters who can learn special combat techniques, emphasis on cool character abilities instead of magic items and buff spells, much more tactical management, and a simpler XP system.
Even basics like class and race have been overhauled. Prestige classing is out, flexible talent trees are in. Multiclassing is much more feasible than the previous edition, and a dual-classed character is now balanced for his level. Even more significant is the new race system, and how this interacts with monsters, monster advancement and monster characters. You unlock new racial abilities as you level up, making a dwarf fighter very different to an elf fighter. Humans will no longer be the dominant race in all fields, and in a return to earlier editions, races will be more strongly suited to their favoured classes.
An excellent side-effect of this racial bonuses is that level adjustments have been eliminated in favour of simply granting the racial abilities gradually as the character levels up in his normal class. Interestingly, this paves the way for creatures who advance by class level to have their own racial abilities! I fully expect that when you open the Monster Manual at “orc” or “hobgoblin” you won’t see a statblock for a “typical orc”. It’s entirely feasible that the “orc” entry will read more like the twenty-level NPC listings Dungeon Master’s Guide. This is a good move, especially since it means you’re going to get much more use out of your standard humanoid miniatures. I also wouldn’t be surprised to find the majority of monsters featuring some sort of advancement options, such that you can run an advanced minotaur or troll straight from the manual without preparation. Again, good for variety, and you get a lot more value out of your miniatures.
If you really want to play your kobold sorcerer, we’ve been assured that this will be an option presented in the Monster Manual. For the moment, at least, monster player characters like beholders are right out. This is no big loss – as well as a lack of variety in many monsters’ abilities, the level adjustment required to balance most monsters made them unplayably weak and left no advancement options. We may see a book on playing monster characters later, but in the meantime, DMs can ad-hoc monster PCs like they used to in second edition.
Wizards will be announcing more tidbits later, and will hopefully confirm my monster advancement theory, otherwise I’ll just look stupid.