Victor Garcia Aprea sums the changes up nicely:

• No reflection is being used – there is a new code model library. On the pros side, this basically means that the tedious file locking problems should go away. On the cons side, this means Reflector now likes to eat lots of more memory . 
• Whidbey support!! – A major hurra! for this one. All Whidbey new features are now supported (i.e. generics, etc). Plus… you can even load a Whidbey assembly with no Whidbey installed… what more do you want ugh?
• Side by side versioning: this wasn’t possible in previous Reflection versions; now you can load for example v1.0 of System.Web.dll along with v1.1 of System.Web.dll; hint: stay away from loading multiple versions of mscorlib.dll, bad things will happen if you don’t.

My favorite tool, to see how things work in the framework and solve disputes on assumptions. (Not to mention steal trade secrets )

[update: Reflector also works with the compact framework assemblies.]

[download reflector from Lutz]