| PCI-E uses the same physical wire paths as PCI (and will be somewhat compatible with PCI) but PCI-E splits up the 32-bit parallel bus of PCI into 32 high-speed serial busses, all timed together. The result is phenomenal bandwidth, for now. I'm sure we'll all be laughing at 'slow' PCI-E in a few years.
PCI Express is the next generation of the PCI bus, which had an ideal limit of 133MB/s. The goal is to both increase the speed for general cards and also eliminate the need for AGP. PCI Express is supposed to do everything by extending the bandwidth limit to tens of gigabytes per second.
PCI Express is also designed to be backward compatible with old PCI cards. We expect it to be 95% compatible, which means most cards will work but some of the specialty card will probably need patches.
The architecture of PCI Express is superficially similar to PCI which was necessary to ensure backward compatibility. PCI Express uses the 32 data lines from PCI as 32 fast serial busses.
Most upcoming PCI-E cards will use just 1 or 2 of the 32 serial busses, thus they will be called x1 and x2 cards. These cards will not need lots of bandwidth, things like sound cards, modems, and other such expansion cards.
Some PCI-E cards will use 4 or 8 paths (x4 or x8) which include cards like Gigabit network cards, FastEthernet cards, and other controller/RAID cards for servers.
The cream of the crop for PCI-E will be video cards, using half of all that bandwidth! x16 is the only way to go for future video cards that will have to push tens of GBs of data per second! And don't worry, because of the serialized nature of PCI-E, x16 vid cards will be totally independent of any other PCI-E card in the system. This whole thing was very carefully done.
On paper, x16 PCI-E looks very promising indeed, but in practice, we are just now getting vid cards that come close to using up all that AGP 8x has to offer. Once again, we are just preparing for the future, and since both AGP and x16 PCI-E are dedicated busses for the video card, there is currently no performance difference between the two. There will, however, be differences in what gets released on either one.
The Radeon X300 and X600 series, for instance, are the first GPU's to be native to PCI-E, so they are currently only available for PCI-E. Once ATI makes a PCI-E-to-AGP bridge, they will be available for AGP 8x. The GF 6800's and Radeon X800's are all still native to AGP 8x, but since these are the top-dogs, AGP-to-PCI-E bridges were ready to go for release, thus these cards are available for both. NVidia and ATI say that all future chips will be native to PCI-E and market demand will determine how many will be bridged to AGP 8x, but they promise that AGP 8x will be supported for at least the next year.
Currently, only Intel's Socket-T CPU's are PCI-E ready thanks to the latest 915/925 chipsets, but AMD won't be far behind.