A sort of other dimension that may or may not be accessible without portals. Either way, once you get in, go to another portal you see and you will transport very far away from your original place. I'm guessing hell is risky though, monsters and demons everywhere, including lava and possibly a new block type that simmers and hurts you when you walk on it.
Scary New Monsters
It could be anything, perhaps a few of those monsters that were in that massive list of suggestions. I'm thinking elemental monsters are going to be a part of the update, but then again, like I said, it could be anything.
This one is obvious, the deeper you go, the more often and perhaps more deadly mobs spawn.
Torches Will Die
I'm guessing that lanterns will replace all current torches, and Notch will receive a spam of comments asking him to change them back because of how tedious relighting torches are.
A use for the fishing rod, can be cooked for a boost in health. I don't know if there will be different kinds and colors of fish.
Health will be fixed, boats will be client-side, chest bug will be fixed, tool dropping bug will be fixed. These are my ideas at least.
Maybe Notch will make them as a portable light source? Or they could be totally useless and we can go trick or treating in them.
This also shows that pumpkins will be a grow able crop, also indicating that there will be more uses for farming and cooking.
I'm guessing a compass type thing, except instead of pointing towards the spawn, it moves around by its own, or it could be a window that opens and shows you the time.
More uses for cooking, eggs, milk, perhaps domesticated animals.
Generally more uses for stuff that he just kind of threw in and left alone, perhaps more records for that jukebox that is sitting in the corner of my shop. I really, really want rideable horses, hopefully Notch will add them soon, giving a use to saddles. Also, saddles NEED to be craftable out of leather.
This update is massive, I hope it shuts up all the whiners who call Notch "Lazy".