At a recent briefing between Nokia Singapore and Microsoft it was mentioned by the head of Nokia Asia Pacific Developer division that the Windows Phone 7.8 update has been shipped to manufacturers.
This means that the update could be weeks, or perhaps even days away, we're not really sure. However, he did confirm the roll-out will commence before the arrival of 2013. The Nokia executive also added that Windows Phone 7.8 will not include Internet Explorer 10 as the aging hardware cannot support it.
Windows Phone 7.8 is essentially a watered down version of Windows Phone 8. New features are known to include the new start screen, Xbox Music and others. It is hard to say whether all pre-existing Windows Phone 7 devices will be updated to Windows Phone 7.8 but it will largely be reliant on the device's OEM.
KitGuru says: While Windows Phone 7 device owners will be looking forward to Windows Phone 7.8; be somewhat weary. It will likely be the last software update your phone receives.