This rumor of AMD discontinuing the Catalyst Linux driver is inaccurate. AMD says they're committed to this binary blob for Linux.
The support for ATI Radeon X1000 (R500) through Radeon HD 4000 series (R700) now lives in an AMD Catalyst legacy branch that may see updates once in a while.
To clear up the rumors, Jammy Zhou of AMD said, "We will definitely continue the fglrx development, which is becoming more and more important for AMD."
The open-source AMD Linux driver has made a lot of progress in the last half-decade, but it's still trying to make OpenGL parity, doesn't yet support some features like CrossFire or advanced anti-aliasing modes, heck it doesn't even utilize PCI Express 2.0 by default and the performance is generally years behind Catalyst. The open-source support for the half-year-old AMD Radeon HD 7000 "Southern Islands" graphics cards is also basically non-functional for Linux desktop users at this point.
This AMD Linux driver news comes less than one month after AMD admitted it has Linux problems, which it's now working to address, particularly when it comes to OpenCL support on Linux for Radeon, Fusion, and FirePro hardware.