Here's how we currently name and number our releases and other by-products.
Nothing here is set in stone, feel free to discuss the relative merits of different approaches 
Stable releases
Stable releases are what we get after a bunch of testing, and are generally announced and celebrated with pink cookies.
They happen whenever stable grimoire got updated and we get around to creating new ones, or whenever we need to add/change/fix something.
Version numbers currently have the form Major.Minor.Revision
- The major number is always 0, and will be until we (SMGL) decide that we are "ready for 1.0"
- The minor number signifies the last major change in installer and/or generation design. So we're now 0.10.x, after the "nearly 1.0" 0.9.x series we had before.
- The last number (Revision) simply numbers the stable releases. So we start at 0.10.0, then the next stable release after that will be 0.10.1, and so on.
- Occasionally, we may "re-release" an updated version of a previous release, without generating "all the way". In those cases, we append yet another number. (so we had 0.9.6, but also 0.9.6.3 and such)
Personally, BearPerson thinks 0.A.1 looks much nicer than 0.10.1, but is too afraid his voters will disagree to use that as a naming scheme
Release Candidates
A release candidate is a "stable release" that's still undergoing testing and isn't released yet.
These are basically produced by building a "stable" ISO (right down to the version number everywhere), but renaming it to, say, "smgl-0.10.1-rc1.iso.bz2" when uploading. If no serious problems are found in some time, it is renamed to a "stable" name on the download sites and announced.
So these are simply named with the stable release number they'll become, plus "-rc", plus a running number.
Test releases
A test release is done to field-test new features/changes from development, before they are released in -rc and stable ISOs. They tend to be announced to SM-discuss, but not to the lower-volume lists.
They should generally work, but by definition won't be tested as well as the stable ones.
Version numbers have the form Major.Minor-"test"Runningnumber
- Major and minor number are which stable series these features will become after testing
- after that, they are simply numbered.
- If there is a need for a test release in the middle of a series, I guess "0.10.4-test1" would work, too.
Development releases
Development "releases" are done whenever a cauldron team member feels like it.
They may reflect the status of development trunk, or a specific branch.
Version format is "devel"[-branch]-date
So development releases may look like "smgl-devel-20080224.iso.bz2", "smgl-devel-fluxcontrol-20080320.iso.bz2", or something like "smgl-devel-xinstaller-20090612.iso.bz2".
If you're insane enough to do several devel releases on the same day, add letters. If you run out of letters, take a break and spend some quality time with your friends and/or family