A new arcade gives you more places to spend your time (and your money!), with real cabinets that you can interact with by taunting nearby. The cinema also now inherits these new screens to show a variety of content.
The game itself is also opening up with a whole new multiple choice dialogue system, where you can gesture towards people to ask them anything that may be relevant! From choosing to begin or end relationships to trading objects, you no longer have to wait for storylines to happen TO you. Just bear in mind that getting your own way is linked to your popularity, and rejection is every bit as dispiriting as it would be in real life, so resist the urge to spam this new feature!
The relationships that blossom from improved communication are also clearer to see, as friends and gang members spend more time together - and can even choose special greetings from the "Gestures" section.
v1.0.5 also contains plenty of other bug fixes and balancing that you can study in more detail here:
http://www.mdickie.com/guides/oldschool.pdf