The details are complex but the basic premise is higher frequencies, smaller transistors and higher density while lowering electrical leakage and maintaining a reliable manufacturer process.
Intel also mentioned that Penryn will have 410 million transistors on a dual core processor compared to the 290 million or so on a Conroe. The majority of these extra transistors will be in the form of cache though some are for the addition of SSE4 instructions. It has been suggested that 8MB L2 cache will be the new standard per core.

Intel are currently running ahead of schedule with two fabrication facilities in the US operational at 45nm by the end of the year and another in Israel in 2008. We can expect that performance and performance-per-watt will continue upwards, just as we saw with the introduction of the 'Conroe' processor last year. Regardless of what Penryn is going to deliver in performance, let's hope AMD are able to introduce something special in order to remain competitive in 2007 through 2008.
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