The key distinction being the ability to find the URLs that you don't know by fishing for the one piece you do remember, that may (inconveniently) not be until the end of the URL.
An example: http://www.boston.com/bigpicture/ which I inevitably reach by typing "big"; this was un-possible with the previous iterations.
Fair point, but if I type "n" I could well end up with news.bbc.co.uk, nytimes.com or any number of other sites I've been looking at. There aren't many sites with the "yc" combination of letters.
Why is this good? I type the letter "n" and news.ycombinator comes up. (I'm on ff 2.0). If I type "yc" I get this:
http://ycombinator.com/newsnews.html
It's deterministic, being alphabetic, and superior in every way. I don't want the fricken address bar throwing dice on my input.