From the LFS site (easier than me trying to remember):
Some S2 features :
Further developed physics and multiplayer systems
2 new single seater racing cars (not for the faint hearted)
3 GTR racing cars of around 500 bhp (keep your hair on)
2 front wheel drive racing saloon cars
2 sports cars, one rear and one mid engine
1 1000cc front wheel drive road car (where's that corner)
Kyoto Ring, Japan - with an Oval configuration
Westhill, England - a high speed track
Aston, England - long and short configurations
8 S1 cars with graphical and physical developments
3 updated S1 tracks (Blackwood, Fern Bay, South City)
New objects added to the S1 Autocross arena
Various types of suspension with realistic motion
Support for symmetric and asymmetric setups
Tyre wear, surface and and air temperatures
48 sampling spots per tyre allowing flat spots
Simulated and visible tyre deformation
Fuel usage, pit stops, speed limits and penalties
F12 Pit instructions system to change strategy
F11 Live settings : anti roll bar and brake balance
Yellow Flag and Blue Flag warning systems
Driver changing for time-based races e.g. 24 hour
And more...
S2 costs £12 if you already have S1, or £24 if you don't. I personally think it's worth every penny, I can't really explain what makes it great, it just feels "right" for me