Internet Explorer 7.0 was expected to include enhanced RSS support, tabbing, better security (including anti-phishing), an easy way of clearing all browser data (history, cookies, cache, etc), and a new layout to match the categorical views of Windows Vista, Microsoft Office 12, and their other upcoming software.
If you know even the slightest bit about Firefox, Opera, or other alternative browsers, you won't be able to help thinking, "Man, where have I seen all of those characteristics before in one browser?" And most would comment "It's about time!" Previously Microsoft had no intentions of updating IE, but decided to do so after Firefox continued to eat away at their market share. They denied that was the reasoning for the most part, but at one point admitted that was the primary reason development was continued. (Scroll back through the Cnet news articles for the past 6 months...it's in there somewhere.)
As to the timing, Microsoft is actually a little ahead of schedule. After launching Beta 1 early last year, they sent Beta 2 our way on January 31st after being originally planned for September. However, the launch was a little premature as people have already begun finding flaws and security issues Microsoft missed. (They started trickling in just hours after Beta 2 was released.) The final release version will come out later this year, though an exact date has not been set. (Some say they may try to rush it through to release in April, though they may hold off until September.)
Personally, I view it as too little too late. They still lack a lot of the features that other browsers sport (such as huge libraries of extensions, the ability to theme the browser, an actual download manager, etc.), and what they have presented comes years after it debuted in Firefox, Mozilla Suite, Opera, and others. In addition, IE 7.0 will NOT be available for those running Windows 98/ME/2000. (The official requirements will be a legal and authenticated copy of Windows XP with SP2 at a minimum, Windows XP Professional x64, Windows Server 2003, or Windows Vista.) I see this as stabbing themselves in the foot, because those who don't upgrade will turn elsewhere. (Ironic how they are trying to gain marketshare back, but are forcing it down, ain't it.)
Beyond that, those who do meet the requirements will be forced to go to IE7, whether they want to or not: Vista ships with IE7 and cannot be downgraded. Those running XP/2003 will, in essence, be forced to upgrade to IE7 through Windows Update like they were with SP2. And, SP3, due out next year, will include IE7, so to obtain the latest service pack would mean IE7 as well. This should be a good thing, but it is believed IE7 will not pass all of the web standards upon its initial release. In addition, not only is the new layout is not being received well by everyone, but it's still lacking features that have turned people onto the alternatives. Simply put, I think that the percentage of people (who meet the requirements) downloading IE will be near 100%, and thus a 'complete success.' However, the percentage of people using IE will continue to drop, perhaps faster than it is now.
Just my 2 cents.