For end users Android 2.0 has new features for contact and account management, Exchange support, improved Messaging, flash support and digital zoom for cameras, new Android virtual keyboard, refreshed browser UI and HTML5 support.
Android 2.0 brings also new developer APIs for sync, Bluetooth, and a few other areas. Using the new sync, account manager and contacts APIs, you can write applications to enable users to sync their devices to various contact sources. You can also give users a faster way to communicate with others by embedding Quick Contact within your application. With the new Bluetooth API, you can now easily add peer-to-peer connectivity or gaming to your applications.
The video below highlights the new Android 2.0 features. Google still plans a minor update to Android 2.0 towards the end of the year. As an end-user you will be seeing new Android 1.5, 1.6 and 2.0 devices. Google tells developers to prepare for screen sizes of WVGA (800x480px) and also for FWVGA (854x480px).
A compact FWVGA Android 2.0 smartphone could be a nice iPhone challenger. The Android 2.0 is though more of a problem to Palm and Microsoft as I see it for now. Apple and RIM are still in their own league.