The new device is promising a much more impressive display and many more features.
It won't be called the iPad 3 or the iPad HD, but simply the new iPad.
And not only was it unveiled Wednesday afternoon, Apple also announced pre-orders begin today.
The new device will be available next Friday, March 16th.
Prices aren't changing from the previous models. They will start at $499. Versions capable of accessing cellular networks will cost $649 for 3G plus LTE to $829.
Apple said the new display will be sharper than the high-definition television set in the living room. The company says it will show more saturated colors than previous models.
The company said the iPad is powered by a new chip with four processing cores, for smoother graphics.
At the launch event in San Francisco, Apple Inc. CEO Tim Cook said, "We are taking it to a whole new level and are redefining the category that Apple created with the original iPad."
Earlier, Cook spoke of a "post-PC" era dominated by the iPad and other Apple products.
In addition to the U.S., the new tablet will go on sale in Canada, Britain, France, Germany, Switzerland and Japan on March 16.
Compared to the iPad 2, the new model features a higher-resolution camera on the back, similar to the one in the iPhone 4S.
The first new feature: the retina display. It has more than 3.1 megapixels. That's more pixels than an HDTV.
And the new iPad has 44% greater color saturation than the iPad 2.
"Everything you do is just going to look stunning; surfing the web, reading your emails, and photos are just going to look amazing," said Philip Schiller, Apple Senior Vice President. The second feature: an eye sight camera."
It has 5 megapixels and much more.
"The iPad has auto exposure, so it takes great exposure, great color, and auto focus," explained Schiller.
The new iPad also features HD video recording at 1080p resolution with image stabilization.
On the new tablet, also expect a new key, a microphone for dictation.
Apple also confirmed that the new model will come in a version that can use Verizon Wireless' and AT&T Inc.'s "LTE" wireless broadband networks. The offer speeds that are faster than the "3G" networks used by previous iPads, and current iPhones.
"On LTE, it starts playing right away, and you can see, it is loading video faster than we can watch it in real time," said Schiller.
Apple is updating some of the software on the tablet to take advantage of the new features. For example, it's introducing a version of the Mac's iPhoto photo organization and manipulation program for the iPad.
The new iPad will be slightly thicker and heavier than its predecessor, but the battery life will be the same, about ten hours of use.
And the company is dropping its price on the iPad 2 by $100. The old iPad will now sell for $399.
Apple also said it would start letting users store movies in its iCloud remote storage service, so they can be accessed through the Internet by PCs and Apple devices. It already lets users store photos, music and documents in the service.
Apple is also upgrading its Apple TV set-top box so it can play movies in 1080p, the highest-resolution commonly used video standard.
Peter Svensson reported from New York.