Like its predecessor, the Aura H2O runs kobo's proprietary reading software on a 1GHz CPU with 4GB internal storage, a microSD card slot, and Wifi. It ships with much the same features and the same bonus apps like a web browser.
The new Aura H2O is currently sitting on my desk, and while I have just started playing with it I can conform that it feels much nicer in my hands. It's slightly thinner than the Aura HD, and it also has a rubberized layer on the rear shell which is both easier for me to hold and offers a more pleasant texture than the cheap plastic shell of its predecessor.
My Aura HD is still charging, so I can't do a long comparison, but I can tell you right now that I can really see the difference in the screens. The newer Aura H2O has a Carta E-ink screen, while the Aura HD has a Pearl E-ink screen, and it is easy to see which one is using the older screen tech.
The screen on the Aura H2O has a whiter and brighter frontlight. The colors stronger. I know that it is strange to say that one grayscale screen is better than another, but in this case it is true.
I can also see that the software is slightly different, but since my Aura HD just went into an update cycle I don't think that difference will last long. I'll let you know if it is different when I post my review in a couple weeks.
The Aura H2O is up for pre-order from Kobo, with a retail price of $180. It is scheduled to ship at the end of the month.