Existing Windows Phone device will get Windows Phone 7.8 update

While Windows Phone 8 (WP8) is rumored to launch on this coming November, it is official that existing Windows Phone devices will getting the Windows Phone 7.8 as a future update, rather a full upgrade to WP8.
  Greg Sullivan from Microsoft has spoken to The Verge that the Windows Phone 8 uses different sets of hardware that are incompatible with the existing hardware in the current generation of Windows Phone devices. This includes multi-core processing, higher display resolution and NFC connectivity.

The good news is that Microsoft will be releasing Windows Phone 7.8 to the narrow the gap and features offered by the existing and WP8 devices. The update will include some of the features from WP8, such as the revamped Start Screen from WP8. Windows Phone 7 apps on the other hand, are backward compatible with WP8 platform.