I’ve just received my Kindle 4, the low-end ad-supported $79 model. I have a Kindle 2 as well, and because I’m traveling soon the smaller form factor and weight was attractive.
I also heard that the display was improved a lot from Kindle 2 to Kindle 3 and from what I’ve heard the Kindle 4 uses the same screen as the 3. I don’t have a Kindle 3 to compare against, but it’s definitely an improvement over the 2.
Hardware wise, it feels that it’s the same in terms of CPU: Downloading stuff from the archive still results in annoying screen refreshes and micro-hanging. Opening the on-screen keyboard results in a noticeable delay. Flipping pages or just rapidly moving through the Keyboard shows the high latency of the screen. No change, but if the Kindle Touch has the same hardware, it just fuels my belief that a touchscreen e-Ink isn’t a great experience.
It is still possible to take notes and highlight text passages. The On Screen Keyboard is not stellar, but it’s okay. I used the Keyboard on my Kindle 2 exactly 1 time so far, to buy a book from the Amazon store. I usually buy books from my Mac, and I never feel the urge to take notes. Realized how much I like 3G actually. Open Amazon on any web browser and use the "Send to my Kindle" option on checkout. Would definitely pay the extra price, if 3G were offered.
There is no Headphone jack anymore, and no Text-To-Speech anymore. It wasn’t great anyway, so I don’t care. But if you’re vision impaired and actually used that feature, you might want to know. Capacity reduction (2 instead of 4 GB) doesn’t matter, bought books are tiny, PDFs suck just as much as they did on the old Kindle, and no audio features means no music. Novels are usually around 1-2 MB, some tech books can reach 5-10 MB, and the (free) Oxford english Dictionary is 25 MB. My 31 books take up 155 MB, with about 80 MB for the mentioned Oxford Dictionary and two other, similar Dictionaries. Battery runtime was apparently reduced, but we’re still talking about a month according to Amazon (down from 2 months), a claim that is not only verified true, but also just means that it went from "So long you don’t have to worry" to "Still long enough that you won’t have to worry".
Does not come with a USB Power Brick, only with a USB Cable. Judging from the coating and looks, I assume it’s the same horrible Cable Amazon ships with all Kindles. Expect the cable to literally fall into pieces and disintegrate in a year or so. Threrefore, don’t buy these crap Kindle-branded cables as replacement when yours disintegrates (that’s a "when", not an "if") but get a plain standard Micro-B USB Cable, ironically sold by Amazon under their own brand as well.
Physical Prev/Next buttons on both sides like on the Kindle 3. They work well and have a nice touch, but I prefer the bigger ones on the Kindle 2. No more holes for book cover hinges – I liked those, but now the official Kindle covers seem to have a hard plastic shell, which is nice. $60 for a lighted cover to cover a $80 device does not look so nice, so I’ve passed on that. I love how the light is mounted though, much better than the Kindle 3 lighted cover which looked a bit makeshift.
Ads are annoying. I thought it wouldn’t bother me much, but I spend a lot of time on the Home Screen and I have 4 pages of books already. I’m only losing one row (9 vs. 10 Books per page) but it just somehow feels I’m losing a lot of space. If Amazon would offer an option to pay the $30 difference to remove ads, I’d seriously consider it. Ads themselves are not annoying and only show up on the home screen and screen saver, not during reading. So if you are cost concious, buying the ad-supported Kindle isn’t a bad thing. (Edit: You can upgrade the firmware to an ad-free one directly through Amazon)
If you don’t own a Kindle but like to read books and don’t mind that you can’t resell individual books, the Kindle 4 is a more than decent reader and a better reading experience than any Tablet will offer, including the upcoming Kindle Fire.
For size comparison, Kindle 4 lying on Kindle 2. Screen size is about the same.