Apple states that v 1.3 changes:

- iTunes 4 support, including playback of AAC encoded audio files
- Audio playback and user interface improvements
- Increased playback time on scroll-wheel iPods
- Longer stand-by time for all iPods
- iPod users with any version prior to 1.3 should upgrade to 1.3.
- iPod Software 1.3 is compatible with touch-wheel and scroll-wheel iPods without a dock connector.

Many users report better performance when running with the iPod (fewer skips and playback stoppage).