Cut, Copy & Paste
Quickly and easily cut, copy, and paste text from application to application. Select entire blocks of web text with a tap. Copy and paste images from the web, too.Landscape Keyboard
Want more room to type? Rotate iPhone to landscape to use a larger keyboard in Mail, Messages, Notes, and Safari.MMS
Send MMS messages and include video, photos, audio, and contact info. Even tap to snap a picture or shoot a video right inside Messages.MMS support from AT&T coming in late summer.Spotlight Search
Find what you’re looking for across your iPhone, all from one place. Spotlight searches all of your contacts, email, calendars, and notes, as well as everything in your iPod.
Voice Memos
Capture a memo, a meeting, or any audio recording on the go. Voice Memos works with the built-in iPhone microphone or with the mic on your headset.
Improved Calendar
Create meetings via Microsoft Exchange ActiveSync and subscribe to calendars with new CalDAV support.
Buy Movies, TV Shows, and Audiobooks
Download movies, TV shows, music videos, and audiobooks from the iTunes Store on your iPhone.
Enhanced Stocks App
Get more at-a-glance information and view charts in landscape.
Safari Improvements
Enjoy faster performance, autofill user names and passwords, and more.
Internet Tethering
Share your Internet connection with your laptop with Internet tethering via Bluetooth or USB. Tethering is not currently offered in the U.S. and some other countries. See your carrier for availability.
Stereo Bluetooth
Connect compatible Bluetooth stereo headphones, car kits, or other accessories.
Automatic Wi-Fi Login
Log in to a Wi-Fi hotspot and iPhone automatically logs you in when you connect again.
Sync Notes
Never leave a note behind. Now you can sync all the notes you write on your iPhone back to your Mac or PC.
Parental Controls
Decide what music, videos, and apps your kids can access.
iTunes Store Account
Create and log in to one or more iTunes Store accounts directly from your iPhone.
YouTube Login
Log in to your YouTube account to save and sync bookmarks and rate favorites.
Shake to Shuffle
Give iPhone a shake and it shuffles to a different song in your music library.
New Languages
iPhone supports 30 languages and more than 40 keyboard layouts.
MobileMe Find My iPhone and Remote Wipe
Find your iPhone if you lose it and protect your privacy with Remote Wipe.
Run the Latest Apps
Run the next generation of iPhone apps, like peer-to-peer games and more.I'll write something about it as soon as I upgrade my iPhone.
[Update]
I've just finished updating my iPhone 3G and... it definitely feels quite a bit faster.
MMS showed up only after I rebooted the iPhone, and all the new and expected features are there - unfortunately the video and voice controls are still missing (and only oficially available for the new 3GS.)
The camera app is also faster and more "instantaneous" to take photos (and low light sensitivity seems to be slightly improved - I forgot to take a reference photo to make a "before/after" comparison.)
Nonetheless this update certainly makes the iPhone feel better than it ever was and is highly recommended.
Just as a side note: bedore you update your iPhone, be sure to leave an empty app "space" in the first screen for the new voice memo app. I haven't, and I ended up with one App overflowing to the second screen (which was full) and pushing all previous apps one extra screen to the right.
And for a full rundown of the new features, be sure to check this post at theIphoneBlog which covers most of it in an excellent way.
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