For a list of all updates - http://www.minecraftwiki.net/wiki/Version_history

But cropping it down...

We're looking at reproducing tamed wolves and NPCs, Iron Golems (who will beat you down if you punch an NPC) Tamable cats, ocelots, the jungle biome with climable vines and massive trees, Improved AI across the board, ZOMBIE SIEGES HOLY CRAP (Terraria anyone?)

Something I'm very excited about - Stairs and slabs can now be placed UPSIDE DOWN! This is big news for those of us who love to build large, intricate structures and - what I think is most exciting - the world height/depth has been expanded from 128 blocks to 256 blocks. This means we can create things on a more massive and thus more detailed scale! In addition to this, double doors have been fixed to work with redstone better!

That said, here's hoping bukkit is quick with their update because I'm excited this time around.

One last word of advice? F3 uses a ton more resources in 1.2, so for those of you using older or weaker computers, be careful with that. Crashes abound!