Video from the Zune Marketplace is sold at 720p resolution, and then downscaled on the device for playback on the OLED. But pop the Zune into the AV dock (yours for another $90, which is too much), and the player outputs the full HD 720p resolution to your TV, over an HDMI connection. The video is one reason for the HD moniker for this Zune.
The other is the inclusion of an HD radio tuner on the Zune HD. Until last week, when Apple announced inclusion of an FM tuner on the new iPod nano and touch, the radio tuner had been a big selling point for the Zune. The new version keeps the FM tuner, and adds the ability to tune in HD signals if they're available, including sub-channels. When docked, HD radio¿s output as well.
The HD's screen is touch sensitive, eliminate the infamous "squircle" control pad of previous Zune models. The touch screen is particually useful for the new web browser built in to the Zune HD. This browser, built from Internet Explorer for Windows Mobile 6.5, has been optimized for multi-touch, and uses the now familiar scrolling, pinching and double tapping to move you through web pages. In our limited surfing time, it handled complex sites cleanly.
On the software side, sad to say, Zune is still Windows only (although there were some hints in our conversations with the Zune team that there might be some chance of a Mac version at some point). That's a shame, because the Zune software, along with the Zune Marketplace service, is a generally slick piece of code, and especially good for people looking to discover new music.