After some time with both an iPad 1 and iPad 2, it's hard to deny the obvious: the iPad 2 is an incremental upgrade to the iPad 1. If you already have an iPad 1, unless you need FaceTime and the rear-facing camera, you really have very little reason to upgrade.
The major improvements in the iPad 2 include speed. With a dual-core A5 processor, the iPad 2 smokes the iPad 1. In addition, the iPad 2 has double the RAM that the iPad 1 had (512MB vs. 256MB).
The iPad 2 has front- and rear-facing cameras. If you need FaceTime, that's an advantage. Realistically, however, the cameras are a joke. The front facing camera is VGA quality, and the rear-facing one doesn't even hit 1 megapixel. It's 0.69 megapixel, and is thus useless for still images. On the other hand, holding up a tablet to take a snap is probably a little on the hard-to-imagine side, but it's probably easier than pulling your iPhone 5 with its (ahem) 5-megapixel camera out of your pocket.
The iPad 2 is noticeably thinner and lighter. And it has that Smart Cover which, unfortunately, Apple decided to make only for the iPad 2. On the other hand, that Smart Cover only protects the screen, not the back, which based on real-life testing, will eventually become nicked up without some sort of protection.
Realistically, that's all there is to the iPad 2 that surpasses the iPad 1. Both can run the latest OS, 4.3.1. Both don't have Flash support (which isn't a positive, but a negative), and both have access to hundreds of thousands of iOS apps (though far less are iPad optimized). Also, both have 3G support, not 4G. Apple will eventually adopt 4G technology, though it is unclear when.
There is another factor to be noted: it is rumored that this fall, Apple will trot out an iPad 3, earlier than a normal refresh cycle. The reason is to move the iPad away from a Spring refresh, and toward a refresh late enough in the year to be a great holiday present. There are other factors, as well, including rumors of an iOS 5 release pushed to fall, which point to an iPad 3 release at that time.
Bottom line: if you have an iPad 1, stick with it, unless you need FaceTime, and wait for the iPad 3, which will be a much more compelling hardware upgrade. On the other hand, if you really, really want an iPad 2, go for it. You almost certainly will not regret it.
Image Source: Wikimedia Commons