Thank you Mike... That's excatly what I thought happened. Though you added a few more details that I didn't know.
I knew that Canon's Autofocus lenses wouldn't fit the earlier (Manual focus) camera bodies. That's why I said in my original post
(talking about the EOS line).
So Canon opened up a new page for the new era and called them EOS and adopted new EF mount lenses for EOS line cameras. (Yes, there are EF-S lenses which are not compatible with some EOS cameras but that's a different issue.)
On the other hand, Nikon did not want to forget it's old custmers and kept their standard mount by just manufacturing the new AF lenses with same the mount and adding the AF motor inside the camera body. This way you buy a new Nikon, you get the full advantage of the new AF system. On the other hand, you have the old Nikon, then you can still use the new lenses; you just can't autofocus which you never did because your camera didn't have that function from the get go.
It is really perfect up to this point and I can say that Nikon was more loyal to it's customers by doing this. However, you are saying that Now!.. to be able to compete with other smaller DLSR on the market, Nikon manufactured a few cameras that has NO AF motor inside the body (I can see D40, D60 are one of them). And of course Nikon had to come up with new lenses with AF motor in lens body for these small cameras that do not have AF motor in them.
So clearly both companies transitioned to new era. Canon just did it abruptly and Nikon dragged it and gave in (thus created a mess IMPO).
This is absolutely a personal preference to say which one is better than the other one. But personally I like what Canon did. Why??? Because I have a Canon? No, but Nikon people will say so anyways. NO reason to argue on that.
So it comes down to (again IMPO)...
-You buy a Canon EOS and you are good to go with all the EF lenses;
-You buy a Nikon, you have to memorize a little chart that tells you which lenses are 100% compatible with your camera and which are not.