The good folks over at MacLife have a great article on some of the new features in iOS 4.2. In fact, it even includes screenshots. I'd write it up myself, but they beat me to it. So, why re-invent the wheel? Check out their article, "22 iOS 4.2 Tips, Tricks, and Features".
If you have an iPhone 4/3GS, iPad, iPod Touch that supports 4.2 or the new Apple TV you will want to update to iOS 4.2 now. Not only does it include security updates, but it also has new features, such as Airplay, which allows you to stream content from your iPhone/iPad to your new Apple TV. iPad users will be glad to see Multi-Tasking and Folders have finally made their way as well. I've seen reports that it's not as smooth as it is on the iPhone 4, but that is probably due to the iPhone 4 having 512MB Ram and the iPad only has 256MB. Still, it's a set of features that should have been out months ago.
The best feature I think is the newly FREE 'Where's my iPhone?". If you've ever been looking for your iPhone/iPad and hadn't shelled out the $99 a year for Mobile Me that included it, you will come to love this feature.