The company plans to differentiate between versions by color-coding the DVDs.
Obviously there will be some type of activation so you can only activate the version you paid for. But it will be possible to upgrade to another version by purchasing an upgrade license - no download will be needed as all versions will be available on your Windows Vista DVD. More info at ARS Technica.
Light Green will be Home Basic Dark Green will be Home Premium Blue will be Vista Business Platinum will be Vista Ultimate