They refer to two related things:
- The X.org version, which is at 7.x. This is also the X11 spec release version.
- The X server component of X.org, which is at 1.x version
The naming isn't terribly brilliant and causes some amount of confusion, but this are effectively the two versions being referred to.
$ dpkg -l xserver-xorg xserver-xorg-core
|/ Err?=(none)/Hold/Reinst-required/X=both-problems (Status,Err: uppercase=bad)
||/ Name Version Description
ii xserver-xorg 1:7.4~5ubuntu18 the X.Org X server
ii xserver-xorg-core 2:1.6.0-0ubuntu14 Xorg X server - core server
See this bug report which addresses this your question: xorg: /usr/bin/Xorg -version gives a wrong answer. From the report:
X.org is modular now. The version
number of Xorg does not mean much,
it's sort a tag on lots of components.
Right now, unstable contains many
components from 7.2, a couple from 7.1
to be updated soon (including
some already more recent than 7.2
The core component of X.org is the X
server (aka xserver-xorg-core, already
1.3.0 in unstable and upstream). This is why you see 1.3 here.