The last time we heard about the Indiana Jones game was back in March when Vanity Fair mentioned it would use the same engine as The Force Unleashed. There's probably a good reason for that.
IGN is reporting that multiple sources both inside and out of LucasArts have told them that the game has been cancelled. The site writes that the team has already been reallocated to other projects.
No official confirmation from LucasArts, which isn't surprising. It also wouldn't be too surprising if this rumour were true. The game hasn't really had any official press in years and skipped the last E3 all together.
Update: LucasArts responded to our questions about whether the new game had been canned with this response:
LucasArts remains absolutely committed to the Indiana Jones franchise. While we are aware that fans have been eagerly awaiting additional information on the upcoming game, they can rest assured that details are forthcoming.
You'll notice that LucasArts remains committed to the "franchise" and not to the game. You'll also notice that they only promise details about the game, but don't say whether those details will be a release date or a cancellation.
LucasArts did not reply to our request for clarification about whether the game was still being developed.