This is about current status of multilingual features in Drupal, how they play together and some proposed approach to have them fully integrated in Drupal. A complete report on this subject, which I hope will be improved with your feedback and some more discussion, is available here: Drupal: i18n Report [Development Seed]
Currently, we have the 'locale module' -core-, which deals with language management and interface translation and 'i18n module', which provides support for multilingual content, translations, but also some language management, providing a block for the users to select interface language.
This is some mixed approach, that is somehow confusing, causes some overlapping and wouldn't be there if we had some clean off the ground implementation of multilingual features in Drupal. This proposal would be in the line of providing this kind of implementation, with some support in core, and some lightweight modules/APIs managing very specific parts of the whole 'multilingual' system.
Though the Internationalization module will be updated for Drupal 4.7, the long term goal of this module is to provide multilingual support for Drupal in a way that can be later somehow integrated into Drupal core. I don't mean it could be just dropped into the core as it is now. I wouldn't pretend it to be 'core quality' code, and worse, it has an important number of hacks and workarounds just to avoid core patches.