Sarge? Sid? Woody? Testing? Unstable?
Debian distribution versioning is a bit, well, difficult to follow ;-) So a short intro on that, as explained by Sebastian.

The current stable release is Debian 3.0, code named Woody. Its supposed to be replaced by Sarge in the next months.

If some criterias are fulfilled, a packages moves from unstable to testing (eg at least ten days in Sid, new versions less or the same bug count, etc). If everything is great, testing packages are already release stable (doesn't work in practice ;-)
So, this is currently called Sarge and has no version number because its still in flux.

If testing fulfills some release criterias at some time, like zero bugs, certain release goals, it is released as the new stable version and gets a version number - so the stable successor of Woody will be named Sarge and will have version 3.1.
The next testing release will be called Etch once Sarge is released.

If a developer creates a new package or a new version of a package, this is immediatly available in the "unstable" distribution. This is called Sid and will always be called Sid.
Sid packages contains completely untested packages (except the testing done by the developer itself).

If some criterias are fulfilled, Sid packages move to testing, see above.

Because unstable packages already need to have a certain release quality (since more or less automatic processes move them to testing), there is the experimental tree to test new packages. Eg one rule is that unstable should not contain packages based on CVS snapshots.
Testing also needs to be dependency complete which isn't required for experimental.
Experimental packages are usually build in Sid (unstable) environments and should be usually compatible with testing environments because the distance between Sid and testing is supposed to be small.

When Sarge is released as a version, the next testing release will be Etch, as in Etch-A-Sketch.