Version 3.0 (codenamed Gingerbread) and version 3.5 (codenamed Honeycomb) have yet to be released. Gingerbread is expected to be released before the end of the year and Honeycomb should arrive in early 2011.
The releases of Android are codenamed after a dessert, in alphabetical order. The custom began in May 2009 with the development of the version 1.5 (codenamed Cupcake). Android 1.6 (codenamed Donut) followed in September 2009 and Android 2.0 (codenamed Éclair) arrived in October 2009. Version 2.2, the current version of Android (unveiled in May 2010), is codenamed Froyo, short for frozen yogurt.
As you can see, Android fragmentation is a serious issue, but if Google releases major versions further apart, it should be able to cut the problem down. Unfortunately, the search giant has only promised to work on the problem, and it has yet to outline a potential solution.