The Cupcake update will improve many things on the G1. Among the most notable changes will be the addition of a virtual QWERTY keyboard, faster camera functionality, video capture and video playback, ability to upload videos directly to YouTube and an updated internet browser. Check out the source link for a complete list of what you can expect from the Cupcake upgrade whenever it finally leaves the kitchen. We get the feeling that the Android 1.5 OS won't leave the kitchen until Chef Gordon Ramsay himself finds it tasty.
source: T-Mobile Forums via BGR