Not much to say here. You can now add backgrounds to your device. It's something that's been oddly lacking from the iPhone and iPod Touch range from the start so it's good to see this finally addressed.
What you don't get with Apple's version of backgrounds is the nice animated scenes that Android offers. Also, bizarrely, backgrounds aren't available on the iPhone 3G.
On the Fly Playlists
This is another ludicrously simple addition but you can now create playlists on your device rather than having to do them on your computer using iTunes. So, if you want to quickly put together a party playlist while round a friend's house, now you can.
Superb though the predictive text abilities of the iPhone OS are, it does sometimes miss a mistake. Now, though, it will highlight those words it thinks you've got wrong with a red dotted line underneath. Click on such a word and alternatives will be presented above it for you to select from.
If you've ever lain in your bed with your iPhone you'll be familiar with the problem of the screen constantly trying to rotate to landscape mode as you lie on your side. Thankfully Apple has fixed this by providing a way to lock the orientation of the screen. Simply double tap the Home button to get to the multi-tasking menu then swipe right to get to the iPod controls. See that little circular arrow? Press that and your screen's locked and a little padlock appears in the status bar to let you know this is the case. Because the multi-tasking menu isn't available to iPhone 3G users, neither it orientation locking.
Apple <3 Microsoft
One of the most surprising additions of iOS 4 is a very small one. You can now specify Microsoft's Bing, as well as Google and Yahoo, as the search engine to use in the search box of Safari.