Colors are more saturated, there is much less blowout, and there is much less stair-stepping. The camera now captures 11mp stills and can do 3 angles for the 1080P videos instead of only the 127 degrees of the original HD camera. The low light performance is particularly better.
Take a look at this image and you can really see the improved sharpness of the GoPro HD Hero2 on the right. Be sure to click on the image to see it full size. Thanks Alex84 for the image below.
1. No stairstepping in the GoPro Hero2 image on the right.
2. The building is MUCH sharper on the right.
3. Everything in the block is sharper on the right.
4. Finer details in the branches in the GoPro Hero2 image on the right.
I won't get it for a few weeks but I've already sold my current camera so can't wait to get the new one!