It's said the update will contain theese things:
* players and mobs in lava or fire no longer spam sound effects
* getting hit with a higher damage while recovering from a smaller one now works as intended
* lava flows further in the Nether
* zombie pigs eventually forgives
* added support for custom texture packs
* fixed duplicate buttons when resizing screens
* zombie pigs and ghasts no longer get hurt by fire or lava
* fixed volume sliders now saving properly
* hellworld=true no longer overwrites old save chunks. Player positions will still break if you switch it on a running server, though
* boats are now visible to other players
* minecarts move nicer
* fishing kinda sorta works, but needs more work
* sheep and cows look like sheep and cows now
* buckets work now
* fixed stairs being really difficult to destroy
* increased the timeout before “Took too long to log in”
* made it possible to ride carts and boats (pigs should work too..)
(list of things fixed are copied from Notch's blog)
He also mentions that most mods that add content to the game is in sort of a gret area when it comes to if it's okey or not, but he points out that they are infact legal, even though Notch himself frowns upon them. He also says that some mods, such as the "bridge mod" is most likely to make it into the game.
He also gave us a neat little picture of how the texturepack skin selection thingy will look like!
Personally I use the standard Alpha skin, but now that I'll get so easy to switch between them, perhaps I'll try some new ones and see what I like.
Over and out!