The softbody, cloth and particle physics now use a unified system for caching and baking. For real-time tweaking, a new option "Continue Physics" will continue the simulation regardless of the current frame.

Render Baking
Great tools for making UV textures: you now can bake normal maps based on rendering a higher resolution mesh, you can bake displacement (including 32 bits depth), and you can bake transparency.

Armature Drawing
Armatures now support Bone groups, custom Bone colors, automatic colors, more custom shape options, ... and many more goodies for our rigging department.

Armature Tools
Many new tools and improvements have been made to speed up the rigging and posing workflow. There are now tools for more intuitive bone creation, various hotkeys to speedy batch-editing of bones,  auto-ik and auto-keyframing tweaks, and many more goodies.

Skinning improvements
Bone Heat Weighting is a new method to create vertex weights for bone deformation, it generates better results, and does not require setting a radius for bones. Also added was Quaternion-Interpolated Deformation for superior blends.

Game Engine improvements
The Blender GameEngine has seen a great deal of improvement with an increase in play-back speed, a number of nice new features including 2D filter compositing, and of course attention to quality through bug fixes.

Soft Shadows
Raytraced soft shadows are now possible for all lamp types; including spot, sun and point lights.

Render Pipeline
FSA gives superior anti-aliasing for high dynamic range and compositing. Zmasks allow rendering of composite masks. Instancing gives efficient memory re-use for duplicates.

Shading features

• Cubic shading (to prevent discontinuity banding)
• Higher level texture coordinates for duplicates (like feathers)
• Lamp fall-off curves
• Softer Halos, premul alpha, multisample shadowbuffers, ...

Python Scripts and API
There have been a large number of script additions and script updates, as well as API improvements since the last release.

Particle system rewrite
The particle system has been rewritten from scratch. It now allows advanced hair grooming tools, but also much better physics, boid animation and even explosions!

Cloth simulation
Cloth simulation is available in Blender via a modifier on Mesh objects. Cloth then  realistically and in real-time interacts with other objects, the wind or other forces, all of which is fully under your control.

Approximate AO
Ambient Occlusion is a render option that darkens areas with less visibility, simulating the effect of environment light. This new AO option is based on quick approximation, giving many factors of speedup.

Mesh Deform Modifier
This new method allows to use any random Mesh cage to become a deformation "lattice" for animated characters. By layering - using both a MeshDeformer and an Armature, you can both achieve high level as precise control.

Action Editor improvements
The Action Editor has been rewritten to have a more flexible codebase that is more future-proof and extendable. This has enabled tools to be shared between the editing modes for Actions and ShapeKeys, and now has many new features...

Constraint System
Constraints are crucial for setting up good character rigs. A wealth of new features have been added to improve and extend this system. Most notable is the addition of PyConstraints, allowing full control to animators.

QMC & Adaptive Sampling
Blender now includes two new sampling methods, using a Halton sequence (Adaptive QMC) and a Hammersley sequence (Constant QMC). Raytracing now also supports adaptive sampling.

Sequencer