Minimum required GTK version is 2.2 (2.4 is recommended).
Overall usability improvements
Improved Xinerama support.
Improved support for Cygwin.
Support for partial struts in xfwm4, xftaskbar4 and xfce4-panel.
Freedesktop specifications compliance for menu and icons themes.
New file locations based on the Freedesktop.org XDG Basedir Specification (all Xfce settings are now stored under the ~/.config/xfce4/ directory).
New and updated translations.
Support for kiosk mode, in which the allowed user actions can be restricted in xfce4-session, xfce4-panel, and xfdesktop (see included doc/README.Kiosk files).
Window Manager (xfwm4):
Native multiscreen support (manage all screens from a single window manager process).
Enhanced support for Xinerama.
Support for more hints from the Freedesktop.org Extended Window Manager Hints specification version 1.3 and above.
Supports the Show Desktop protocol.
Supports KDE context help.
Support KDE system tray icons.
Window menu features an Always on top option.
Graphical keyboard shorcuts editor included in the xfwm settings manager dialog.
Xfwm4 now has his own optional compositing manager (a manager for the new X Composite extension present in X.org 6.8). This adds a dropshadow to all windows and supports setting window transparency by applications themselves or by using a tool like transset.
Improved focus management.
Support for image composition with PNG images layered above the pixmap frame, allowing for gradients or other color effects.
Completely new default look. Several new themes added.
Change location of themes to be more in line with gtk, metacity, and others.
Application's icon and name shown in the Alt+Tab dialog.
Desktop Manager (xfdesktop):
Gradient support for background color.
Brightness adjustment for the backdrop.
Real multiscreen and Xinerama support.
Support for icons in window list and applications menu.
Ability to disable/enable icons in each menu, or the menus entirely.
Graphical menu editor with DnD support from xfce4-appfinder and .desktop files from Rox, Konqueror, Nautilus, Xffm, etc.
Add "-menu", "-windowlist" and "-reload" options for "xfdesktop", to be used in keybindings.
Support for 'system' menu, which lists all apps that install *.desktop files according to the Freedesktop.org Menu Spec.
Panel plugin to show the menu (yes, it's a Start button).
Use a menu cache to improve performance after it has been generated once.
Kiosk mode support.
Panel (xfce4-panel):
New look with smaller move handles and new default icons.
Uses global icon theme setting (in user interface dialog).
Improved resizing and moving behaviour; panel is forced to be on the edges of the screen.
The panel is now a dock type window, which means it will always be on top.
Improved focus handling; clicking on the panel will not remove the focus from the currently active window.
There can be only one panel per X screen. Multihead supported when environment is set up properly (DISPLAY variable).
Support for kiosk mode.
Unload unused plugins and dynamically update plugin list. Use dialog to add new panel items, instead of a submenu.
Mail checker now supports mbox, Maildir and POP3.
Support for dragging applications from xfce4-appfinder to a launcher properties dialog.
Transparency when the X Composite extension is enabled and the window manager supports it.
New module in 4.2: manage applications on Xfce startup.
Themeable splash screen engines.
System shutdown/reboot support using the sudo mechanism.
Major performance improvements over the previous snapshot versions.
GNOME/KDE compatibility.
Native multihead support (Xinerama and multiscreen).
Doesn't rely on smproxy (or any rewrite like gnome-smproxy), but provides (partial) session management, even for non-SM or X11R5-SM aware apps.
Kiosk mode support.
Settings Manager (xfce-mcs-manager):
New dialog layout: buttons have a label below icon and are arranged in multiple columns.
Font rendering setup dialog.
Merged Desktop Workspaces and Workspace Margins dialogs.
Display resolution and gamma correction dialog.
API version was bumped (plugins linked against the old version won't work until you recompile them).
Customizable icons.
File Manager (xffm):
Two independent panes (eliminated confusing behaviour from 4.0.x).
Completely reworked toolbars and menus.
Better archiving support (creating tar/tar.gz/tar.bz2 archives).
Improved trash handling with support for GNOME and KDE trash bins.
Use global icon theme (user interface dialog).
Allow user customization of icon themes.
Improved Samba support (allow mount/unmount, double click, monitor downloads).
Keeps track of recently and frequently opened files.
Applications branch is now a toolbar (only available if compiled with "--enable-panel").
Ability to change file name, group, owner and mode allowed from inline row editing.
Dynamic sidebar.
Improved Asian language support.
Pastelink option added (i.e., create symlinks to pasteboard elements).
Recursive scrambling of directories (only available if compiled with "--enable-scrambledir").
Mount/unmount of fstab points allowed from outside fstab branch (by popup menu).
Mouse selection behaviour configurable by user.
Verbose/nonverbose diagnostics configurable by user.
Renaming of bookmark elements allowed.
Noticeable performance improvements under the hood.
Search window called directly by invoking xfglob4.
Files opened directly with associated mimetype application if invoked with "xffm filename" (path to filename can be absolute, relative or relative to homedir).
Printing Helper (xfprint):
Completely rewritten to use a pluggable printing backend system.
Use either CUPS, BSD-LPR, or a file as the print destination; printers are retrieved from the chosen printing system (no need to add printers to the list manually).
GTK theme engine (gtk-xfce-engine-2):
Completely new default theme.
Improved drawing of control elements to enhance usability.
Utilities (xfce-utils):
Configurable taskbar width and height.
Taskbar has always group tasks option.
Taskbar has selectable left/center/right alignment and variable width.
Taskbar has right-click action menu.
Call 'xfrun4 filename' to get an 'Open with...' dialog.
Taskbar has option to show only icons.
About dialog can be compiled with extra vendor information.
Run dialog now properly checks if command fails.
Updated user guide.
Small changes to startup script and xfhelp4 script.
Volume Control (xfce4-mixer):
Complete rewrite of the mixer with settings manager dialog.
Mixer profiles.
Support for ALSA, OSS and Sun audio.
Calendar and Appointments (xfcalendar):
First day of the week option removed (managed through the locale settings in gtk 2.4 and above).
New Application Finder (xfce4-appfinder):
New module in Xfce 4.2: find (and run) applications.
Alternative interface to the application menu.
Icon Box (xfce4-iconbox):
Make iconbox a dock type window (always on top), like the panel.
Make the iconbox transparency configurable when using the X Composite extension.
Icon Theme (xfce4-icon-theme):
New module in Xfce 4.2: Freedesktop.org icon theme with special icons for Xfce; it includes both PNG and SVG icons.