The Apple website describes it as something for "casual listening", and Steve Jobs himself said it wasn't great at the keynote. But really, how good of a speaker did you expect from something that's thinner than a pencil and has a touchscreen?
As for other improvements, it's even thinner than the old Touch, and has a volume control on the side. Oh, and they're cheaper now (8gb model starts at $229). Other than that, not much different.