Does anyone know if current iPhone users will be able to trade in old iPhones and upgrade to the new one?

M. Jackson Wilkinson explains AT&T’s upgrade policy for existing AT&T customers. In short, original iPhone owners can buy new iPhone 3Gs for $199/299 because the original iPhone wasn’t subsidized. But if you purchased a subsidized (non-iPhone) phone from AT&T and are still in your mandatory two-year contract period, you’re still paying off your last subsidy with your monthly fees, and so you’ve either got to wait or pay full price for an iPhone 3G ($499/599).

What this means, though, is that when Apple comes out with next year’s new iPhone(s), iPhone 3G owners are going to have to pay a penalty to upgrade.

I believe if you bought your iPhone on or after May 27th then you can get the 3G free. Nothing set in stone though. Mostly just rumors.