Yes, Windows 7 will come in many different flavours, but according to Veghte, it doesn't really matter to most Western customers because they will only ever see Windows 7 Home Premium and Windows Professional. Starter and Home Basic will only be available in emerging markets, and Enterprise will only be available to customers in the volume licensing program (large companies and enterprises). The Ultimate version will probably not be sold via OEM channels, but will be bought separately by people who really need all the bells and whistles. The company will, however, focus mostly on Home Premium and Professional, and states those will make up for 80% of Windows 7 sales.
There will also be additional changes. For instance, each higher-priced version will be a superset of the lower priced version. No longer will a certain feature be available in Windows x, but not Windows x+1. In addition, every Windows 7 disk will actually carry all the features of Windows 7, so there's no need for additional disks.
If we look at the versions on a closer level, we see that Windows 7 Starter will carry most of the Windows 7 features, such as the new taskbar, but it will lack the live previews (which constitute a major part of the new taskbar's functionality, so that doesn't make any sense). In addition, you will only be able to run three programs at a time, and it will carry limits on screen resolution and other hardware elements. As said, this version will only be available in emerging markets.
The Home Basic version moves up a notch by removing the application and hardware limits, but for the rest, it's still pretty, well, basic, with no Aero support, no multitouch, no DVD playback, and no Windows Media Center. Like Windows 7 Starter, Windows 7 Home Basic will only be sold in emerging markets.
The two versions that actually matter to us Western consumers, Windows 7 Home Premium and Windows 7 Professional, are very akin to Windows XP Home and Professional. The differences between them amount to Professional being able to join domains, as well as having features such as DirectAccess, BitLocker, and the ability to boot from a virtual hard drive.
By more or less focussing completely on these two versions, Microsoft does seem to show that it has learned something from the Vista debacle. Removing the crippled versions from the OEM channels is obviously a very good move, but it probably won't stop the complaints about the company's product tiering.