Physical Characteristics
The iPad 2 is absurdly thin. More importantly than it's thinness is its tapered edge which feels more natural in your hand. One of the biggest complaints about the original iPad was it really wasn't tremendously comfortable to hold for long periods at a time. For a tablet device designed to be held, that's a pretty big deal. Apple really has done an amazing job of cramming everything into an even smaller space than before and the difference is really noticeable when you're holding the device. In addition to the tapered edge, Apple managed to reduce the overall weight of the iPad 2. That might not seem like a huge deal to most, especially when you consider the weight difference isn't tremendous when you're already under 2 pounds, but I spend a good part of my day holding the iPad in my hands and the weight difference is surprising by the end of the day. The first generation isn't heavy by any means, but the iPad 2 outshines it.
New and "Improved"
Apple doubled the RAM in the iPad 2 from 256MB to 512MB. What does that mean? For most casual users, probably not a whole lot. There is a performance bump that everyone will see the effects of in things like loading times for webpages that are open in the background, but 256MB was sufficient for most daily use and games. If you're planning to use your device for some of the more graphically intense games the iPad 2 does offer a better method of graphics processing that'll help deliver faster images with fewer jerky movements. If you're just playing Angry birds and reading e-mail you're not going to know the difference.
The screen is the same for all real purposes. It is technically a "new" part in that it isn't identical to the old, it's a bit thinner and more efficient, but it's the same resolution. The Glass is thinner though, and this amounts to a fair bit of the weight loss from one generation to the next. In playing with the device it seems surprising but despite feeling lighter it actually feels more sturdy in your hands. I still wouldn't suggest dropping it, but if it were to fall the iPad 2 certainly feels like it might stand a better chance to survive. Try not to drop it though.
The addition of 2 cameras was expected. Some were a bit surprised to see the first generation released without the cameras. Whether it was for a price point consideration, or a means to get people to upgrade, Apple held off until iPad 2. The cameras do a reasonable job, but they're not going to replace a dedicated digital camera, or really even the camera on your phone for most still images. The cameras do a substantially better job with video, and FaceTime is probably one of the best reasons to get the iPad 2 over the original iPad. For those who might not be familiar, FaceTime is Apple's face to face conferencing system, kind of like Skype, or if you'd rather, kind of like the Jetson's TV/Phone. With the push of a button you can be having a face to face chat with a loved one just about anywhere in the world (provided they're on a wireless network at the time). FaceTime doesn't work over 3G natively (it can be used over a wifi connection created by a 3G device however) so you're not going to be able to use it in your car anytime soon. This is probably a good thing though. It is incredibly easy to use and if you know other people with an iPad 2, iPhone 4, or Mac it's a lot of fun.
Smart Covers aren't really "smart" but they're really very useful. Not only do they provide a stylistic enhancement of the device, but they serve a practical and functional purpose of doubling as a screen protector and stand in 2 configurations. You can find them in a variety of colors and from third market suppliers, and it's a safe bet that more will be out soon to capitalize on the magnetic sensors in the iPad 2. It's unfortunate that this same feature can't somehow be retrofitted to the iPad 1, I wouldn't have thought a case would be a compelling reason to consider a product over it's competitor, but these covers are really so useful it's hard to understand why they've not been there since the beginning.
Multitasking Support
One of the biggest knocks against the iPad when first released was the lack of native multi-tasking support. Jailbreakers added the feature quickly and Apple soon realized it would be a requirement for any future device's success and released an OS update that included the feature. The iPad 2 capitalizes on that progress and takes it a step further with the increased RAM enabling more open applications to be suspended at once, and the time to open or close an application has improved as well. That said, even the first generation managed to open and close apps faster than most people would be used to on their computers, so while this is an improvement it's more akin to showing off.
Apps
One thing that Apple has clearly the advantage in for the moment is app availability. The App store has close to 70,000 iPad specific Apps, all of which will work on the iPad 2. The new cameras will undoubtedly see this list expand rapidly, as will the inclusion of a gyroscope for gaming and motion based uses. There are also a substantial number of professional applications ranging from document creation to photo editing and vector drawing. Chances are if you can dream it, there's an App for that (and if not you might want to get started on one to fill in the gap). The Android market is making a strong showing, and ultimately it'll likely be a strong competitor, for now it still has a ways to go, but any potential buyer should consider the strength of the application market before buying a tablet.
Pros:
Weight. Seriously. The minimal weight of this thing is by far the most impressive feature about it in my opinion. It seems to defy physics and logic that so much could be in such a small space working that hard for that long.
Battery Life. From full to dead my iPad 2 went just over 11 hours with the movie Robin Hood showing twice during that time, the screen at half brightness, wifi turned on, an Angry Birds marathon and a good portion of a book in ibook. That's better than a work day and that's constantly on.
Books. This is definitely a Pro, but reading itself could go either way. The great benefit to the iPad is having access to Google Books, ibook, Nook, and Kindle. This allows for some comparison shopping and price competition (although for the most part they're all usually about the same). Reading in the evenings in bed is great as the back light means you don't have to worry about keeping others awake, but the glass screen causes some glare trouble when trying to read outside or near a sunny window. If you're an avid outdoor reader the Kindle might still be your best bet.
