According to AdAge, Facebook has plans to cut in half the number of different advertising products it offers to brand partners over the next six months, down from the current total of 27. As part of this streamlining process, the "sponsored stories" option is being ditched.
Sponsored stories were introduced in early 2011 as a way to turn Facebook friend interactions into something that actually took part in the ad--for example alerting your friends if you checked in at Starbucks, and associating this fact with a little branded ad. Early reports suggested sponsored stories may be performing twice as well as branded ads, but in the interim, it seems Facebook has decided that this system--as it stands--should go.
Meanwhile the U.K.'s Telegraph points out what Facebook is actually doing here. It's going to take some of the core ideas of sponsored stories and insert them into its new, simpler ad offerings. In the news feed, new ads will look more like a typical friend interaction. In other words, Facebook is almost masking the ads so you actually pay attention to them, instead of simply skimming over them. The only indicator that a particular feed element is an ad may be the small grey "sponsored" text below a post.