[Update: This is now confirmed.]
It's official: Season 4 of Battlestar Galactica will be the last.
IESB caught up with James Olmos (who plays Admiral Adama on the show) at the Saturn awards, and when asking about the next season of BSG, he replied:
"This will probably be the most extraordinary season of Battlestar, it’s the final season so, it’s definitely going to be the most vicious."
The reasons cited for ending the series were lack of audience numbers and the expense of producing the show.
Now I absolutely love Battlestar Galactica, but I think this may turn out to be a good thing for the show. Much like the recent story about an end target date for Lost, knowing in advance when a series is going to end allows for the remaining story arc to be plotted without a lot of filler episodes that go nowhere. BSG, although an awesome show, could get very old with the armada plodding through space year after year, always on the run and never reaching Earth. Also, as I've mentioned in many posts regarding Lost and X-Files, you can only jerk the audience along so far with unsolved mysteries before they stop caring.
So, yes, it's a bummer the show is ending... but I think in the end it will leave a much better legacy than if it dragged on for another three or four years. That's kind of what happened with Stargate SG-1: They went on for a season or two too long, and although the current show is ok, it used to be great.