WHATWG split off from the W3C work because they couldn't organize additions and clarifications to the HTML 4 spec under the W3C. It is mostly a group of browser-makers (everyone except Microsoft).
The W3C then asked if they could standardize the WHATWG's work as HTML5
What happened a year ago (and is just being put on slashdot today?) was that the WHATWG announced that they weren't going to stop producing additional work. The version under the W3C would eventually be released as version 5.0, but WHATWG would effectively be the HEAD/master version of work on extending HTML.
Which HTML5 is an easy question to answer - there will only be one HTML5. People will put pressure on the browser manufacturers to support the W3C's standardization of HTML as version 5.0. But browser manufacturers will also continue to cram new crap and functionality in ahead of W3C standardization, and attempt to define interoperability of that under the flag "HTML" in WHATWG, a "specification" that grows as the members gain consensus on how new functionality should work (or in some cases, how to advertise the functionality is not offered).
In reality, this is how HTML has _always_ operated.