iBook G3 versus iBook G4

I've had both. It's pretty close in some ways.

The iBook G4

• Speedier than the G3 model.
• The G4s can take more ram. 
• Almost all iBook G4s can run Mac OS X 10.5, Leopard. 
• There's a much wide range of software that still works on Leopard (newer browsers, iLife, iWork '09, Evernote…).
• There's a patch that enables iBook G4s to run external screens at resolutions up to 1680x1050. This isn't supported but it seems popular and worked without a hitch on my iBook G4. 
• USB2.
• Wifi: WPA and WPA2. 

The iBook G3

• The G3s cost maybe 25-50% less. 
• The model you see might just seem better than other iBooks. 
• If you're not buying it for web-browsing, you mightn't notice much of a difference. Text editing is text editing. 
• Dropbox is supported, so it can sync with other machines in useful ways. 

Judgement Day

If I really had to choose, I'd buy a G4, because I like to have Leopard, the G4s are a bit snappier and MacTubes gives access to most of Youtube and some other flash sites. And you can hack the graphics cards on some iBook G4s so that they run external displays at up to 1680x1050. That's the same as a 2006 20" Intel iMac.

Apple have a great iBook comparison page if you'd like to know more and Low End Mac has a lot of tech summaries and articles as well.