<p>I'm confused by the discussion and advancement both of a new version of HTML and a new version of XHTML. Are they competitors? If so, what is likeliest to be the adopted future of the web? If not, what is the differing non-competing purpose for each?</p>

<p>Are we due to have a BluRay/HDVD battle here? Is there ultimately any clear decision? I fear a future where browsers pick and choose among the easiest and/or flashiest features of each to implement, leaving web developers trying to sort out the lowest common denominator for any new web app.</p>

In my opinion HTML5 will be the next dominant format. XHTML is just too unforgiving to be used in a web environment (you can't have the page fail on every small error...).
HTML5 is shaping up to be quite the treat for web developers - a formal spec for the CANVAS element, native drag-and-drop API, an offline storage API, server notifications API (push model), a formal content editing API and much more. If they can deliver even half of what they are proposing to, it will be a major advancement for web applications.