Aside from the new features found in iPhone 1.1.1, CNet details the important security fixes that accompanied the 1.1.1 upgrade.
Some may be planning on keeping their 1.0.2 iPhones for various reasons (unlocking, 3rd party software), but you should be aware of the number of vulnerabilities that are patched in the newest iPhone update.
Many of the issues affect Safari, with 7 distinct issues being addressed.