Primary developer IBM has pulled the plug on it, according to German website Heise Online, which has quoted the company's vice president of Deep Computing (cool title) David Turek as saying a next generation Cell processor will not be launched. A successor to the current PowerXCell-8i were due to have a pair of PowerPC processors and 32 SPEs, but now the 8i will be the end of the line.
Sony, Toshiba and IBM all worked together on developing the Cell and research began in 2001 with the PS3 the first commercialised product when it hit shelves in November 2006. How this will effect plans for the PlayStation 4 is unknown, but given the console is infamously difficult to code for, developers are unlikely to be crying themselves to sleep at the thought of an architecture overhaul. Incidentally, a highly modified tri-core IBM Xenon processor is in Xbox 360, though it shares none of the core Cell features.
If there is good news to come out of Cell's demise then it is the influence of multi-core computing it has had on the rest of the industry. AMD's Fusion and Intel's Larrabee technologies are living proof of that, but I suspect it won't be of much comfort to Sony and Toshiba right now...