One of the very nice things about Windows Phone 7 has been its relative lack of fragmentation, facilitated both by Microsoft's minimum specifications and their push to update every single device to the latest version. Currently, Windows Phone 7.5 Mango is running on all Windows Phone devices, and they all have the same basic feature set and applications.
A leaked roadmap from last December showed that the next version of Windows Phone would be Tango, and that it would be focused on bringing to market smartphones with "the best prices." Back then, we predicted that it might cause some quality control and fragmentation problems, and some screenshots leaked today seem to prove that we were at least partially correct.
Of course, Tango will still bring a few new features to the platform, such as multiple images in MMS, native voice notes, better contact and roaming management, and possibly even video MMS. Unfortunately, that is pretty much where the good stops. Tango will also greatly lower the standard for Windows devices, allowing those with as little as 256MB of RAM, 3MP cameras, and likely slower processors and smaller screens to be sold. Additionally, users of those low end devices will be unable to download certain apps, instead getting an unhelpful error telling them they need a phone with more RAM.
Windows Phone Mango had so far been a good alternative to Android and iOS, but the Tango update will at least muddy the waters for consumers. On the right device it will be perfectly fine, but low end devices will likely serve only to confuse and frustrate consumers. It seems possible to me that Microsoft my be transitioning Windows Phone 7 into their low-end OS and planning on Windows 8 for flagship hardware, but whatever their strategy, I would hold out for Windows 8 if you are considering a Microsoft powered mobile device.