Basically the biggest changes are in the combat, which is actually a perfectly functional third person shooter now, and the inventory system. Instead of having to put skill points to determine whether or not you can use an SMG or a shotgun, you either can or can't. Certain classes can use certain weapons, with the Soldier having all the firearms available. Rather than find hundreds of useless guns that you eventually have to either sell or reduce to an almost as equally useless goop, you find upgrades to be researched, as well as new models of weapons over the course of the game. Once you find a new weapon of a type, it's available for any of your characters that can use it. You pick the weapons you're going to take with you on a mission from a pre-mission loadout screen after you choose your squad.
Missions feel more like "levels" now, and you receive experience and money from a debriefing screen after you've finished. It's all still very much the same Mass Effect as before though, only better in about every conceivable way. There's so many characters to interact with, so many quests and great locales. If you're importing a character from the first game, the amount of your decisions that carry over is pretty much staggering. I've come across NPCs that I'd completely forgotten about since my playthrough of the first game, and I've come across a few choices I made in the first game that clearly won't have concrete ramifications until the final game in the trilogy. It's pretty revolutionary storytelling stuff.
C'mere, Frankie-Baby! Grab a slice o' these BALONEY TITS! - Clarke Snyder, 7/22/2006