It's quite a bit better, yeah. inFamous 1 often had rather enclosed story missions and put the enemies in places which took some work to get to, or took a good precision shot. inFamous 2 doesn't really have this - the ground cover system is almost never used in this game. Enemies are much more diverse now, so you'll need to develop some situational knowledge for each enemy. It makes for a much, much better flowing game.
There's a lot more morality exclusive content. A lot of story missions will completely split depending on whether you take the good or evil path.
Story is about as good as the previous game's, though I'd say it ramps up more quickly.
The new powers system allows for quite a few different takes on the main abilities. Even moreso on a second playthrough. Melee attacking is much more useful in this game, the Amp has good range and stun and the combo finishers will pretty much always kill enemies.
Improved Static Thrusters lets you move around the city one hell of a lot easier. The vertical launch poles and lower buildings in general help, too. Lightning Tether is particularly awesome for movement, though you get it really late.
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[NO BARKLEY NO PEACE]
im here to you dark soul with my LIGHT -ertyu