I view most upgrades with a good dose of suspicion but iTunes 8 was an essential upgrade to go with the iPhone. Inside iTunes 8 is an interesting concept brought to life, called Genius.
Basically, through some wizardry of artificial intelligence, iTunes' massive database can be tweaked to analyze your music and make up playlists based on any single track you select.
This may seem a bit pointless, but to be honest I tend to select and play albums and thereby don't go near many of the tracks that make up my iTunes music library of 3,300 "songs". Genius has the ability to find lost music I don't go near and it is surprising just how much of it is gathering digital dust on the hard drives.
So here is Playlist 1, courtesy of iTunes 8 Genius: