I realize that this feature might very well be number one on most people's list. I'm just more into video these days, and since I just moved to Tokyo I just don't have as many friends and family nearby to photograph as I used to.
But all you photographers out there must be jumping for joy at this new feature. When iPhoto finds a picture of (for example) Grandma, it will ask you to type the "Grandma" in the label field. From there iPhoto does all the work, as it will scour through the rest of your photos, analyzing faces for more pictures of Grandma. You'll be asked for confirmation, just to make sure that iPhoto didn't mess up. I'm curious to see how accurate Apple's facial recognition software is. I have three brothers, and I doubt any software could distinguish between all of our faces successfully. But that remains to be seen, of course.