1. Cut-Copy-Paste

Left: Selecting some text. Right: Option to cut, copy or paste the selected text.
This is by far the greatest feature in 3.0. Now you can cut, copy, paste whatever you want. You can copy a URL from Safari to your Notes, copy text from your Notes and send them through Email or SMS, copy SMSes and paste them on your Email, copy text and paste them back to Safari. The possibilities are endless. And this one feature alone makes the upgrade worthwhile.
2. Spotlight Search

Left: Searching for "game". Right: iPhone home screen. To bring up Spotlight, just swipe your finger to the right or press the home button when you're already at the home screen.
You will be familiar with Spotlight if you have used a Mac before. It searches system wide, including your Email, Notes, Apps, Music, Internet shortcuts and Phone contacts. It's really convenient if you want to find an Email containing certain words.
3. Voice recorder

Left: A simple voice recorder. Right: "About page" showing the firmware version.
It used to be impossible to record secret conversations using the iPhone. But not anymore. Put an iPhone in a room and be surprised at what you might hear.
4. Improved Camera

Source: news.softpedia.com
Strange but true, although the camera hardware remains the same, firmware 3.0 lets the camera take better quality pictures. This may have something to do with how the camera hardware is controlled (e.g shutter speed, ISO) and also post-processing.
5. MMS

Left: Send a picture through MMS. Right: Unrelated: Search through your emails.
MMS requires firmware 3.0 and "ActivateMMS2G" from Cydia. See here for instructions.
6. SMS Forwarding

Left: Normal SMS conversation. Right: Click "Edit" and now you're able to delete individual SMSes and to forward them.
There used to be a time when I couldn't forward funny SMSes because the iPhone doesn't allow SMS forwarding! But now that has changed and it's easier to use than ever. With a few taps I can send the entire SMS conversation over to another person.
The above are just a few features that I find very useful. The 3.0 firmware has over 100+ new features and the complete list can be found here. Also check out Apple's official 3.0 page.
Instructions on how to upgrade your iPhone 2G can be found here. Happy upgrading!



