Final Fantasy Versus XIII was announced way back in 2006, and since then Square Enix has barely spoken about the game. So it's not altogether unbelievable that the game has finally been outright cancelled, closing the book on its long string of delays.
One source tells Kotaku that the game was canned within the last few weeks. Reportedly Square Enix has decided to let the game slowly fade out of memory, rather than mention its cancellation explicitly. Other sources claimed that development resources from Versus XIII had been put into Final Fantasy XV months ago, though it wasn't clear if this meant actual assets or staff.
Square Enix is hosting a Final Fantasy event focused on the FFXIII project, but none of the events from that show are focused on Final Fantasy Versus XIII. Unless we see a surprise announcement at that show, and given the reports that Square is choosing to kill the game off quietly, it seems likely that the game has been removed from the company's line-up.
Shacknews has contacted Square Enix regarding the reports, and will update as more information becomes available.