This makes perfect sense, since this update isn't targeted at bringing new features to existing handsets, but to add compatibility for lower end devices. So, we had the original Windows Phone 7, which was codenamed Metro. WP 7.5 was Mango. Tango becomes WP 7.5 Refresh. And, all expectations put Apollo as Windows Phone 8.
Of course, since Tango is an update that will come to all WP devices, it will add fixes and features to existing handsets. And, for lower-end handsets, it will modify the experience a bit by disabling some more resource intense activities like multitasking and Live Tiles.