The changes (this only considers the initial 2E core books compared to the full 1E system):
Races:
* Half-orc was removed from the game.
* Gnomes were given stat modifiers
* Maximum ages were lowered, in some cases (elves) dramatically.
* Level limits for demi-humans were significantly raised.
Classes:
* The Barbarian, Cavalier, Assassin, Monk and Thief-Acrobat were removed from the game.
* The Bard was utterly changed, becoming a base class: a minor magic-user with some rogue and song abilities.
* The Illusionist became a specialist wizard without a separate spell list (see Magic)
* The ranger changed drastically, becoming a two-weapon fighter with minor druidic spell ability.
Magic:
* Many spells (like Magic Missile and Fireball) were capped as to the maximum damage they could do.
* The Illusionist was folded into the Magic-User (now Wizard) class, spell lists were combined, and idea of specialist wizards was introduced for each school of magic. (Extra spells/day but some barred spells).
* The Cleric and Druid spells were combined, and broken into "spheres". Clerics and Druids had access certain spheres according to their class and beliefs.
* The Druid's "Heirophant" levels were included in their progression tables.
* The Ranger lost magic-user spells and changed what divine spells they had access to.
* The sale value of magic items was removed.
Proficiencies:
* Weapon specialisation was retained from UA, but double specialisation was removed and bow specialisation was weakened.
* Non-weapon proficiencies were moved from the WSG and DSG basically unchanged, although the presentation was clearer.
Combat:
* The weapons vs. armour tables were simplified and made optional.
* Initiative was now based on a d10 and greatly clarified.
* Surprise was now based on a d10 and greatly clarified.
* Instead of combat tables, the use of THAC0 was promoted
* A new unarmed combat system
* Other minor changes
Experience:
* XP was gained only for killing monsters, although story goals were also suggested (no XP for treasure or magic items).
Monsters:
* Giants and Dragons were significantly increased in power, along with a few other monsters.
Cheers!