While Wordpad received a refreshed user interface in Windows 7, including the now-ubiquitous ribbon, Notepad remained pretty much the same. If you're an eccentric power user (like me), it's great having a no-frills text editor with no splash screen or feature bloat at your command for those quick configuration file and web page edits. However, if you think Notepad needs to get with the times, you can always give Notepad 7 a whirl.
In terms of functionality, it doesn't add anything new to the Notepad experience, other than the Office-like navigation ribbon. In terms of pros, its presentation is slick and it'll feel right at home with the Windows 7 versions of Wordpad and Paint.
Unfortunately, there are a few cons. It defaults to Segoe UI for the font, which is not a great thing seeing as mono-spaced fonts are a must for looking at code. It also eats 16MB after start-up, compared to Notepad's 1MB. If I wanted to be extremely picky, the word "New" is spelt with an extra "o" in the File menu.
Still, if for some reason you really can't stand Notepad's plain look, it's worth checking out. Of course, power users will find the versatile Notepad++ remains one of the best Notepad replacements, bringing considerably more than an overhauled interface to the party.