Really, the post title says it all. I happened upon this thru vince (http://vccv.posterous.com/) the other day whom I spied using split panes in a terminal session. While the split panes are great on their own (and are a feature I find sorely lacking from the standard terminal app), it's only a small part of the feature set iTerm2 rocks.
Maybe my favorite feature is the ability to call up a persistent terminal session thru a hot-key -- pressing ^-Cmd-T slides down a semi transparent terminal window the width of my screen and a portion of it's hight which upon losing focuses slides back up.
To anyone who has spent time on linux only to move to OS X, this is a must have -- as it is for anyone who's ever only used the standard Terminal app.