Before you upgrade your device it's always a good idea to back up all of your data. This is especially important when you haven't synced your device in a while. While the chances of a error occurring and forcing you to go full restore are slim, it's always a good idea to backup your stuff.
Notice the new rectangle with arrow shooting out of it? Yeah, that's your new friend AirPlay. Airplay sends your pictures, audio, and video to the Apple TV, and audio to Airport Express and third-party speakers that support AirPlay.
If you've lost an iPhone and you haven't signed up for MobileMe, you know the pain and misery of trying to track it down without Find My iPhone. with iOS 4.2 you get free, that's right free, Find My iPhone. There is a catch, you need to set it up with an iPhone 4, iPad, or 4th generation iPod touch. Once that's done, you can find all your iOS devices.
iOS 4.2 now supports CoreMIDI. All your favorite music apps can be upgraded to work with MIDI devices and with GarageBand and Logic. Really, any app on the Mac that supports MIDI should be able work. All you need is the always magical iPad Camera Connection Kit and a MIDI to USB cable.