v-with can now be used to bind a parent VM's data property to the child VM with a different key, e.g. v-with="childKey: parentKey". Doc here and here.
added parent instantiation option. This allows developer to programmatically create nested VM instances. Doc.
added new VM instance property: $options. This can be used to access custom properties in instantiation options. Doc.
added interpolate global config option. When set to false Vue.js will skip interpolation for all mustache bindings. This is useful when there is server-rendered user content that could potentially include mustache bindings.

when creating custom directives, the developer now need to explicitly pass in isLiteral: true, isEmpty: true or isFn:true to create literal, empty or function directives.

$index and $key are no longer directly attached to data objects. They are now meta properties that can only be accessed on VM instances, not the data objects themselves, since the same data object can have different $index or $key when observed by different VMs.
Fixed replace: true option causing compiler.el and vm.$el to be pointing to the old, replaced element.
array.splice(0) now properly empties the array in supported browsers.
When printing an object, e.g. {{$data}}, changes inside Array elements now properly propagate out of the Array and trigger change to the object containing the Array.