To make a long story short: the ADO.NET team is now responsible of ADO.NET Entity Framework (including LINQ to Entities) and of LINQ to SQL (the last one was originally in charge of the a separated team, tied to the C# compiler).

There is an evident overlapping between LINQ to SQL and LINQ to Entities and since the first day, Microsoft said that in the long run, these two solutions would have been merged into a single one.
Now, the roadmap that is arising is: Entity Framework will be improved adding features that will be necessary to cover scenarios where LINQ to SQL today is preferred over LINQ to Entities and Entity Framework.

There are a lot of comments – I suggest you starting here to get a good recap and pointers to many others.

My personal opinion is that LINQ to SQL is very good in some scenarios and should not be dropped until a good alternative (in EF?) is available. For example, I use LINQ to SQL to implement nightly processes that are part of ETL solutions. In these cases, I use LINQ to SQL to read data (expecially configuration data, but sometimes also source data) and use the SqlBulkCopy API to write data into destination tables. Having all the necessary into a single executable file, without external dependencies, is a big advantage for deployment (a single file to copy). Today LINQ to Entities would be slower, would have more files and would require .NET 3.5 SP1 on production servers (the last one would not be a real issue in my case). There are of course other scenarios when there is something that makes LINQ to SQL a better choice against the current version of Entity Framework.

My hope is that a convergence of two partially overlapped frameworks is good, but at the same time this shouldn’t be a penalization for the current users of the “losing” part. This will require several releases of .NET to be done, and I hope that in the meantime the LINQ to SQL engine will have a decent evolution to keep its current position of “light LINQ oriented DAL replacement to SQL Server”.