Instead, they will create a new variant of the D&D 3.5 rules, called the Pathfinder Roleplaying Game, licensed under Wizards' Open Gaming License. The root of Paizo's announcement is that there is not yet an OGL for 4E, meaning that they cannot support the new rulebooks shipping this spring. However, some of the rumbles around the D&D-o-sphere suggested that there was an element of XP-vs-Vista going on as well. Paizo could continue to publish using a perfectly good set of rules rather than jump through hoops and hope for a fair and timely 4E OGL.
Another plus for Paizo -- and players and game masters -- is that an alpha version of the Pathfinder rules are being distributed via PDF, bringing an open source sensibility to the equation. Anyone can download these rules and make suggestions, allowing a judicious evolution to take place. A printed beta version of these rules will be available in August with the final rules planned for '09. On the Paizo forums, already fans are starting to clamor for rules changes.
While the Pathfinder announcement was huge, and has to be taken as a blow to Wizards' OGL program, Paizo was quick to promise support for 4E. Paizo publisher Erik Mona said
We know that many of our readers are looking forward to 4th Edition. We still plan to release an entire line of 4th Edition products through our partnership with Necromancer Games, including a brand new Tome of Horrors hardcover monster anthology, adventures, and other exciting products. (Much of this support will depend, of course, upon the terms of the still-in-development Game System License from Wizards of the Coast, but we remain hopeful that Paizo will be a major player in the 4th Edition arena as well.)
Good luck to Paizo's new baby. For more information or to download the new rules, check out the company's web site.