This is hardly much of a rumor.  Apple tries for annual updates on all of its major products and the IPad2 was released in March of 2011.

As for what will be included in the upgrade that too is mostly simple:

1.  Look for what wasn't upgraded in the last releast
2.  Look at what other Apple products have that this product doesn't.
3.  Look at what will make the product seem really dated if they had to wait another year for it.

So the announcement will have:

Improved Graphics
Siri officially supported
Improved Camera front and back.  Back camera will be the same as on the iPhone5

Also possible will be:

A quad-core processor
Changing to a widescreen screen ratio.  It will be kind of lame for the back camera to be able to take 720P video if the screen can't show it without black bars.

The big question is not about iPad 3 but iPad 2.
Does Apple continue to make the iPad 2 and sell it at a much lower price as an entry level tablet?
A $300 or $350 iPad 2 would put a stake in the heart of most would be rivals.

This just in, Ipad 4 in April, followed by the new Ipad 5 in may.