Hooks to enable adaptive streaming

Beta2 adds client support for "adaptive streaming" - which enables managed code to be able to pull in media files and streams from arbitrary URLs, and then reassemble them and pass them off to the video and audio decoders. This can enable a whole lot of different ways to address how to make media available, including supporting seamless streaming switching between content encoded at different bitrates. And since this is all running inside managed code, a CDN or content provider can tune the heuristics used to get the optimal content from the optimum server.
While the API is in place, we don't have any full end-to-end demos for how this works at the moment; you'll be seeing a variety of ways to use this technology down the road. Since our API is so flexible, I imagine customers and partners will find all kinds of fun things to do with it.

Content Protection

Beta2 includes client sideWindows Media DRM 10 and PlayReady DRM support.  Both work cross browser and cross platform. Note that WMDRM10 will require a PlayReady license server (available in the coming weeks); existing content will work with Silverlight, but with the new license server.

Server Side Playlists

Beta2 adds improved support for server side playlists on Windows Media Services (previous releases only supported client-side playlists). That's still a feature in development (we are still a beta), so if you have server-side playlists that aren't working as you expect, it'd be great if you could put a link in comments, or email them directly to me so we can see what's going on. Note that web playlists from the IIS 7.0 Media Pack have always been fully supported.

Quality and Performance improvements

While there's no API change here, Beta 2 includes a variety of improvements to both performance and quality (particularly scaling quality) during media playback. Full-screen playback in particular is improved.

Windows Media Audio 10 Professional

And don't forget that Silverlight 2 adds support for the WMA 10 Pro codec. This isn't changed from Beta 1, but it's a big improvement compared to the stock WMA in Silverlight 1. WMA 10 Pro in the 32-96 Kbps range is what we call the "LBR" or Low Bit Rate mode, which is up to 2x as efficient as classic WMA. Audio is quite understandable at 32 Kbps, danceable at 48, an flawless at 64-96. Expression Encoder 2 supports the new modes, and Windows Media Player 11 can play them back as well.
For Silverlight 2-only projects, WMA 10 Pro is the codec of choice for any kind of bandwidth constrained content. And, of course, it's supported in Expression Encoder 2.

Also, note that, like WMA, WMA 10 Pro also supports 2-pass VBR encoding, which can help quality further when doing progressive download. 48 Kbps average 96 Kbps peak can sound pretty great.