Attached Link: http://wiki.blender.org/index.php/BlenderDev/ClothSimulation

The cloth thing is new, based on the softbody physics.  You could do cloth before with just the softbody stuff, but this adds some things that make it easier to get it right.  The [change log](http://wiki.blender.org/index.php/BlenderDev/ClothSimulation) for the development version has  a pretty good explanation of how to use it, along with other new features.