The first, and in my opinion the biggest improvement, is the new concave analog stick. It's heavily updated and looks much more comfortable with extended usage as well as better overall control. Anyone that's used the original PSP can account for the terrible analog stick it currently uses, so this could be a great improvement. The buttons also look to be concaved as well, which should be an improvement.
The second physical improvement is, what looks like handgrips that jut out from the back. I'm wondering if they're bigger for a second reason which is the extended battery life as I have no idea how large the new battery is physically. I know that the first generation battery tends to be a bit larger physically than the 2nd and 3rd generation, so who knows.
Well these are great additions that I'm looking forward to for the PSP. Hell, even cosmetically I think it looks good.