It appears that Microsoft has decided that it will bump Windows Phone up to version 7.5 with the Mango update. While there is no official confirmation yet, an upcoming Mango preview calls it the “New Windows Phone OS 7.5.”
Mango is scheduled to be released later this year (there are rumours it could slip to 2012). It is expected to come with IE9, Silverlight run-time and HTML 5 support, Far Eastern language support, improved multitasking, and more.