Steve Jobs originally announced this at the September 1st event in which revealed the iPod Touch would have a front facing camera for face time, so I’m not going to elaborate much on HDR photos. High Dynamic Range photos are basically a mixture of high and low exposure filters mixed together creating an equal balance of quality in a photo to its highest level possible.
This feature will not be available to 3GS or 3G users for the simple fact that the 216MB Ram built in would not be able to handle the process of quality enhancement on the devices without crashing. There is hope however, you can download apps like ProHDR, ClearCam, and ProCamera to get full HDR features.
If you plan on jailbreaking please remember to back up your ECID before you update to iOS 4.1. If you plan on unlocking then you shouldn’t be updating in the first place.