(And here I was going by the title and thinking that the question was going to be about the Bonnet Creek Resort.)
Everyone's pretty much given all the pieces to the puzzle. Here's the full story combined in one:
Pop Century was conceieved as one large resort, built in two distinct phases: The Classic Years (50's-90's which is open now) and The Legendary Years (1900's-40's which can be seen across Hourglass Lake). Both were started at about the same time, and were scheduled to be completed within 6-12 months of each other, similar to how Port Orleans and Dixie Landings were constructed.
Then came the drop in tourism, due in large part to 9/11. Construction on both halves of Pop Century was halted. The Classic Years was farther along than Legendary, but it still had a ways to go before opening. Everything just sat there for over a year. Then, in late '02/early '03, construction started back up on Classic Years. It was completed and opened in December '03. The partially-built Legendary Years wasn't touched at all. (Apart from perhaps giving the completed shells a coat of paint so that they weren't QUITE as horrible looking)
So, the Legendary Years have sat there with only the exterior of the main building done, as well as the shells of two of the 10 guest room buildings done. I believe the foundations for the other 8 buildings are poured, but they're just sitting there.
For now, Disney feels that they have enough room capacity on-property. When they think they need more hotel rooms, they'll most likely finish off the other half of the resort. The latest rumor/assumption is that most or all of the rooms will be family suites, similar to the ones being tried out at the All-Star Music.
-Rob