Microsoft's next DirectX won't be named Windows Graphics Foundation (WGF) as it was planned but will keep the old DirectX 10 name.
It will arrive with Windows Vista and it won't be backward compatibly with previous versions of DirectX.
Microsoft has decided that backward compatibly with DirectX 9,8,7 isn't really necessary as there will probably will be even less compatible with Vista.
Even so, dear Microsoft hasn't totally forgotten us. Some sort of “compatibility” will be available through a software layer (probably some emulation) which will have its price in system resources, as it will run much slower. The good news is that DirectX 10 will relieve some of the burden on the CPU.
And of course it will have support for the next generation of Pixel Shaders 4.0, although it will probably surface before even Vista's release due to the rapid development of graphic cards.