The app has been redesigned to fit smaller screens. The app is divided into Home, Genres, Search, and Instant Queue tabs. From the Home screen you can see a list of popular content and a link to resume the last video you were watching.
As for video quality, it looks pretty good on my iPod touch with a 480 x 360 pixel display, streaming over a WiFi connection. I suspect videos might not look quite as good if you’re using the Netflix app over 3G with a higher resolution device such as the iPad or iPhone 4, but that’s just a hunch since I don’t have the means to test that theory.