If so, will it affect how retailers price items? Will they round up?
Not true. There is, however, an ongoing debate about it. Are they worth the time/money to mint. How much to retailers "spend" on tracking, counting, sorting, etc.
The last highly publicised event in Canada was a private members bill from 2008.
Other countries that have eliminated their equivalent have indeed followed the rounding methodology; reference Sweden.
So for example if we were to eliminate the penny and keep the nickel. All purchases would be added up using their penny price. Then if the total ended in 1,2,6,7 it is rounded down, and the rest up (or left as zero and five).
2012-03-29 Breaking News:
The Canadian federal budget released today is indeed phasing out the penny. "The Royal Canadian Mint will no longer distribute pennies as of Fall 2012." They will, however, remain legal tender indefinitely, and redeemable at any bank. Non-cash transactions like debit and credit will retain cent denominations, but cash remainder values of 0.01 or 0.02 will round down, while 0.03 and 0.04 will round up.
It would make sense for pennies to be phased out in Canada (and the U.S). Because the value of the coin is less than the metal in it.
Shopkeepers would "round up." But pennies are worth relatively little these days. The term from my boyhood, "A penny for your thoughts" would be worth at least a (US) "nickel" today.