list of features
Most important:
1. Support for new video codecs, including DivX!
2. Can now download/buy original XBox games from the marketplace for 1200 points. Halo, along with a handful of others will be the first available.
3. Enchanced community functionality / social networking. You can now write a little bio about yourself; restricting it to just friends or letting anybody see it. If enabled, you can also browse the friends lists of your friends.
4. XBox Live Arcade hits. This is basically analagous to platinum hits. Older very popular arcade titles will become available for a discounted price. Lumines will be one of the first offered, at 800 points.
5. Inside XBox - basically a constantly updated stream of new game news/info.