The Bose QuietComfort 3s are indeed significantly smaller their predecessors, and they feature an on-ear (supra-aural) rather than the over-the-ear (circumaural) design of the QuietComfort 2s. Impressively, the earpieces employ a cushy memory foam that conforms to your ears nicely, and they do a better job than you'd think of passively shutting out noise, unlike most on-ear models, which tend to let in--and leak out--a fair amount of sound. The headphones are very comfortable, but because the deliciously soft leather pads are pressed right up against your ears, the newer models are going to feel steamier if you wear them in warmer environments. They're probably not the best choice for workouts.
The Bose QuietComfort 3s feature the same fold-flat design as the QuietComfort 2s and have noise-canceling circuitry that's built into the headphones themselves, not a little box incorporated into the cord. They also come with a protective carrying case that's a little smaller than the one that ships with the QuietComfort 2s, as well as a two-prong adapter for plane travel and an extra bit of cord that extends the length of the headphones.
Aside from the more compact earpieces, one of the big differences between the two headphones is the inclusion of a proprietary lithium-ion battery with the new model. That's a nice plus--the battery slips out of the headphones and into a compact travel charger that fits right into a wall socket, obviating the need for annoying wires or cables. Bose says you'll get about 20 hours of battery life before you need to juice up--and you must have the battery charged to actually hear your music or movies. While backup batteries are available for $50 each, you won't be able to pop in a standard AAA cell like you can with the QuietComfort 2s. However, the charger fits snugly in the headphones' carrying case, and you can purchase additional chargers compatible with international voltage requirements.
Companies such as Sennheiser make noise-canceling headphones that are smaller and cost much less than Bose models. Apparently, Bose has received feedback from consumers who prefer these smaller designs, especially for everyday on-the-go use rather than just airplane travel. In other words, the company hopes to get more people walking the streets with these headphones. To that end, the company sells a $40 adapter that lets you use the QuietComfort 3s as a stereo headset for multimedia cell phones, such as the Nokia N91 or the Palm Treo models.