Tap and hold is a multi-touch gesture that Apple introduced into Mobile Safari in iPhone OS 2.0. It triggered a popup a menu that allowed users to Save Image to the camera roll.
In iPhone OS 3.0 it's been given a bit more power. Now, in addition to selecting blocks of text for Copy and Paste, when you tap and hold on a link, you trigger the same type of popup as the Save Image function, but instead you get the URL path for the link and options to Open (in the same page/tab), Open in New Page (tab), or Copy (the URL path).
If the link is also an image, you get all of the above options, with Save Image combined into the mix.
May not seem as sexy as MMS or Stereo Bluetooth but we heart this new functionality. It will make our lives easier, which is what OS updates should do.