The short version is that your .Mac account email address will work just as it did before, but you'll have a choice of using either email@example.com or firstname.lastname@example.org. If you have aliases setup at .Mac they will continue to work as well. All your .Mac websites will continue to work at both mac.com and me.com. Your email and contacts will magically be transferred to MobileMe, but you will no longer be able to check you accounts using Mac.com's website: it'll all happen over at Me.com.
Also, the increased storage limits will be applied to your account, but it might take up to 10 days after the migration from .Mac to MobileMe before you see the new limits reflected in your accounts.