Some of the more useful improvements to Windows Vista come in the underlying file system. There are a ton of improvements under the hood to make files easier to deal with. One of the more subtle but important differences from Windows XP is the way discrepancies are handled during file transactions.
In Windows XP, if a file encountered some kind of error (file already exists, etc.), it was handled at the time it occurred, interrupting whatever you were doing. If the same thing happens on Windows Vista, the operation continues, and you are prompted to resolve the conflicts at the end of the process.
The UK's Official Windows Vista Magazine covers it as one of their favorite features:
The problem I have with this dialog is that it is misleading. The first option makes me think two things are going to happen, the file is going to be copied, and then replaced. I had to think about it for a second. So I don't think it is intuitive enough.
I think a better version would say "Replace", "Keep existing", "Keep both files". That leaves no doubt in my mind what is going to happen.
What do you think?