The Nexus S might be a groovy piece of hardware, but what we're really hot and bothered for is Android 2.3 Gingerbread.
Google has an in-depth overview for developers, but here's the highlights of what we're digging in Android 2.3.
A refreshed UI
The Android UI in Gingerbread isn't vastly overhauled, but aesthetically, it's being tugged in a quirkier, nerdier pseudo-80s direction: Lots more "Android green" and orange on black, with a flatter, two dimensional feel to system graphics. Fun! How's it better for users? Well, the notifications bar is revamped, there's faster shortcuts to the task manager, options and a new system-wide downloads manager.
it easier for the user to navigate and control the features of the system and device."
A better keyboard and copy & paste
Yes, this deserves to be called out separately from the rest of the UI, since a huge weakpoint for Android's been the mediocre stock keyboard. The new keyboard not only looks better, it's functionally improved in several ways. The new layout is more spaced out with redesigned, easier-to-hit key targets, and it uses multitouch key-chording (finally!), so typing is legitimately faster. Copy and paste is less finicky, too, so you don't need a trackball to make it useable—it's easier to select what you want to copy with a more iPhone-like system of cursor selection.
Internet calling natively
I'd bet dollars to donuts that carriers are going to strip this out once they get their hands on Android 2.3, but natively and system-wide (in the dialer and contacts), Gingerbread supports VoIP calls to SIP addresses. One small step for pure data, stomped to death by carriers.
It's gonna be even faster than 2.2, which offered a huge performance boost on its own thanks to a just-in-time compiler for Dalvik, the virtual machine layer Android executes apps in. Android 2.3 adds a concurrent garbage collector the Dalvik VM, which Google says "minimizes application pauses, helping to ensure smoother animation and increased responsiveness in games and similar applications."
It also is just plain faster at responding:
The plaform now handles touch and keyboard events faster and more efficiently, minimizing CPU utilization during event distribution. The changes improve responsiveness for all applications, but especially benefit games that use touch events in combination with 3D graphics or other CPU-intensive operations.
Brad Fitz explains in more nerdy detail here. Oh, and it's got newer video drivers for better looking games.
Better battery life
Despite being faster and prettier, battery life is going to be better too. (As TechCrunch notes.) Why? Android is going to be more aggressive about managing apps running in the background, minimizing power draw (and boosting speed at the same time).
It's funny, a lot of the new stuff in Gingerbread—like the new UI and VOIP—won't make it to most of the Android phones offered by carriers, even after the inexorably long wait people will have to sit through for 2.3. How long? Officially, Google will be open-sourcing Gingerbread "in the coming weeks, at which point OEM's/manufacturers can take the source code" and start doing stuff with it.
So, sit tight. But that doesn't mean we can't be excited about it in the meantime.