HDMI v1.3's greater video capabilities are basically "future-proofing" the HDMI spec. There is currently no hardware (source devices or displays) and no media formats (broadcast or physical media) that can make use of the extra video bandwidth offered by v1.3. HDMI v1.3 video changes also include support for 120Hz refresh rates, which can potentially be a very good thing, but 120Hz support is going to be similar to the funny business surrounding early 1080p displays - just because a display can
operate at 120Hz doesn't mean that it'll
accept a 120Hz input. Likewise, you need a source device that is both HDMI v1.3 compliant
and will output at 120Hz.
Tom Norton had two good posts in his Ultimate AV blog a couple weeks ago looking at HDMI v1.3 from both a
video standpoint and an
audio standpoint . Basically, HDMI v1.3 added three key things to the HDMI spec: bitstream support for new audio formats (DD+, TrueHD, DTS-HD MA), automatic lip sync control, and more video capacity. The catches are that the new audio formats can in theory be decoded in the player just fine (although DTS-HD has been rather elusive) and may even
need to be decoded there in certain cases, that the automatic lip sync control will only work if the entire signal path is HDMI v1.3 (source device, receiver/processor, video display, and anything else along the way) in order for the automatic sync adjustments to be right, and that no displays or sources can really make use of the extra bandwidth or (at least for now) the higher refresh rate.