The Microsoft Band is dead. Microsoft is no longer working on any new Band products internally, any Band 3 developments have been canceled, and there will not be a Band 3 release. That's sad news, but that's not the whole story.
There's been a lot of misinformation going around regarding the Band 3 and whether it has actually been killed. Going off what's been said internally, Microsoft has canceled plans to release the Band 3. No longer are Microsoft actively working on new prototypes or testing any new features for a new Band. There are many reasons as to why it has been canceled, but the reason I hear the most is because Microsoft couldn't get Windows 10 running on it.
Regardless, it doesn't matter why it has been canceled because that doesn't actually change anything. The Band has been put into "Sustained PLE," which is an internal term for "end-of-life" support. Anyone who is familiar with Microsoft will know that end-of-life means that product line has been discontinued and that the only work being done now are software updates for the current product on the market. There is no ongoing development on a new Band device.
But that doesn't mean Microsoft are finished with wearables, as that would be a bad move on Microsoft's part. There are whispers internally that Microsoft is in fact looking at taking a lot of what they did with the Band line (in regards to sensors) and putting it into a new product that could possibly be released in the far future. So even with the Band 3 being canceled, it'd be foolish to not release some other kind of wearable in the future.
Microsoft's taking what they did with the Band line's sensors and is building a new wearable product… but that's a long way off.
If Microsoft does end up releasing a new wearable in the future, it'll almost definitely be running some kind of lightweight Windows 10 SKU, which would make sense considering Microsoft wants to put Windows 10 everywhere. The Band product line was never meant for Windows 10, which is an OS that some might argue is too big and complex for the simple tasks Microsoft wanted the Band to be able to do anyway. Whether Microsoft are successful in getting Windows 10 to run on a wearable remains to be seen.
It's not clear what branding Microsoft will give a new wearable, but I wouldn't be surprised if it were something under the Surface banner (that's pure speculation on my part). It will be a while before we see anything official from Microsoft regarding a new wearable, however, so if you're holding out for a new wearable from Microsoft in the near future, you might as well give up and begin looking elsewhere. Or you could stick with the Band 2, as that will still be updated every so often, and works pretty good even today.