Here is a list of features straight from Amazon.
- Collections: Organize your books and documents into one or more collections.
- PDF Pan and Zoom: Zoom into PDFs and pan around to easily view small print and detailed tables or graphics.
- Password protection: Password protect your Kindle when you're not using it.
- More fonts, clarity: Enjoy two new larger font sizes and sharper fonts for an even more comfortable reading experience.
- Facebook and Twitter: Share book passages with friends on Facebook and Twitter directly from your Kindle.
- Popular highlights: See what the Kindle community thinks are the most interesting passages in the books you're reading.
Keep in mind that Amazon has a strange update method where they send updates themselves to Kindle devices wirelessly. These are "rolling" updates so there really isn't a way to know when you'll be getting your update.
As for owners of the first-generation Kindle, update 1.2 is basically as good as you'll get at this point.