One of the features of the new iPad that Apple brags about is the new camera. The FaceTime front-facing camera is still a poor quality VGA camera, but the rear camera has been upgraded to a 5 megapixel iSight camera with a f/2.4 lens and 1080p video-recording capabilities. Although it's not as good as the iPhone 4S' 8 megapixel camera, it's still a huge improvement from the poor camera featured on the iPad 2.
The first thing I found interesting is that even though both the new iPad and the iPad 2 have a VGA front facing camera, it was clear that the new iPad has a better sensor because the image looked a lot brighter. What didn't come as surprise was how much better the rear facing camera was on the new iPad.
I recommend watching the above video in full screen so that you can really see the difference between the two video cameras. One thing I noticed is that when recording video, the new iPad has a tighter (closer) crop than the iPad 2, but when taking still photos, the new iPad has wider crop than the iPad 2.
Speaking of images, the iPad's new lens blow's the iPad 2's VGA lens out of the water. The iPad 2 produces dull, grainy images and the new iPad actually takes some pretty nice photos. No, they aren't quite as good as the iPhone 4S, but I'd venture to say that they're better than the iPhone 4 -- although, I haven't officially done any head-to-head tests.
Here's a couple examples that show just how much better the new iPad is at taking taking photos. In each pair, the photo on the right is taken with the new iPad and the photo on the left is with the iPad 2. (Click the images to see larger versions).
The first photo really shows how much more detail the new iPad picks of up in its images. Look at the trees and grass -- the iPad 2's version look blurry and pixelated.
This next one demonstrates that the new iPad produces much better bokeh (out of focus area), and has a shallower depth of field. This is why in the new iPad's version, the flowers really seem to pop.
No words are needed to describe this next pair. Just look at how dull and boring the iPad 2's image looks. Gross.
So I think the video and images speak for themselves -- the new iPad's camera is a huge improvement over its predecessor. But the real question is -- will the improved camera actually give you the confidence to walk around taking photos with a big ol' iPad?

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