While the Roku 3 features hardware improvements both inside and out, its software has received the most TLC this time around. Users will immediately notice a difference in the UI: instead of the old horizontal layout, there's now a grid of icons, which has greatly increased the amount of information on-screen at any given time. Roku has taken a page out of the classic gaming console's book and it shows -- like the evolving experiences on (most notably) the Xbox 360 and the PS3, the new screens also include a healthy amount of promo space for additional channels and / or content. Still, the navigation is simple and the ad / promoted space is far enough out of the way that we don't anticipate it bothering users. Overall, the change works as intended, offering quicker access to the channels you already know you want and bringing to light channels most users may not even know exist from its catalog of 750-plus.
The apps themselves have remained the same for now, although a number of the more recently released ones (Spotify, Amazon) have been chugging noticeably on the Roku 2. There's no hint of that here, with the upgraded CPU capably handling each option we tried. One minor annoyance remains: not every channel has the same features. For example, pressing down on the d-pad doesn't always reveal picture quality or time left information. In our limited testing with Plex, the app loaded much more quickly and began streaming videos faster. Video performance seems to be the same between the newer and older units, while forum posters report the Roku 3 could more capably handle their streaming 1080p MKVs, though YMMV. One other addition is the opportunity to change the UI with different themes. It's not a major change, but we tried out a few and found them pleasant enough, without any that negatively affected the experience.
Users will immediately notice a difference in the UI.
Still fresh on the software front is a feature that actually debuted late last year -- Roku's cross-provider search. While other devices (TiVo, Xbox 360) and services (Flixster, TV.com) offer similar functionality, Roku's implementation comes out on top, especially with the upgraded hardware. If you're really trying to find a particular movie, particular actor, et cetera, one of the included services will have it and you can reliably and quickly find them, especially if you're using the iOS or Android mobile apps for a keyboard. Of course, limited selections on subscription video services mean most of what you'll dig up will cost more money to stream, assuming it's available online at all. That said, Roku's wide coverage of services and lack of a monthly service fee make it an ideal solution.
Regarding those mobile apps, we didn't notice any substantial updates. And that about sums up our thoughts on the software changes -- that they don't go far enough. If you were expecting significantly expanded support for different file formats / codecs, it's not here; the list of new channels is (for the moment) limited and even the updated UI will appear on older boxes within the next few weeks. We've seen Roku continue to mold its players via updates and we expect no different from this one, but today, the difference in experience from 2 to 3 doesn't feel like a generational leap.
We'd like to see Roku do more to become an entertainment hub / extender with cloud-based games or more apps that tie into pay-TV services like Comcast or DirecTV. It's already made strides in that direction with channels like TWC TV and HBO Go, plus a few games / apps, and it feels like the platform has a considerable amount of headroom going forward. It's greedy, sure, but many with a Roku can envision a future where it's the only box connected to their TVs, and the software hasn't quite brought it there yet.
The competition

The Roku 3 replaces the Roku 2 XS, and unless you require an analog audio out, it's an upgrade in every way.
Compared to other boxes in the segment, the Roku's standing has stayed largely the same. If you're looking for integration with Apple's iLife, the Apple TV with support for AirPlay streaming of music, video and games will consistently win out, despite fewer options for native apps. If you'd like to bring your own content to the box via a library of rips, downloads or otherwise, the WDTV Live family offers more consistent file / format support, network connectivity and a fleshed-out local player interface, however having a Plex client here helps to even the playing field. The Roku 3's strengths aren't exactly game changers (yet) but as a mostly platform-independent box that offers access to many of the media services you probably already use for a reasonable price, its place remains secure.
Some of the new Roku's biggest competition for new buyers will come from its own predecessors. Currently, the Roku 3 replaces the Roku 2 XS, and unless you require an analog audio out, it's an upgrade in every way for the same price. The difference in the software experience will be easier to evaluate once the older boxes have been updated with the new menus -- due next month -- but the value proposition here, again, remains mostly the same. The $99 box offers several features you may never take advantage of over its lower-priced brethren (1080p, gaming remote), but, particularly with the processor difference, if you're planning on using it for more than just a Netflix box, this is the only real option right now. We've already seen many apps require the Roku 2 and up, and future-proofing for whatever's down the road is not so expensive that moving down the line makes a lot of sense.
For those who already own a Roku, this makes a worthwhile replacement if you're ready to pass that box off to a friend or move it to another room. That said, we'd probably wait a bit longer to see exactly what software tweaks, upgrades and differences come out in the future. A faster, smoother-operating box and the remote control / headphone feature are nice to have, but not at $99.
Wrap-up

Just like the Roku players before it, the Roku 3 is the easiest-to-recommend media streamer on the market. An appealing package of services, accessibility and price has gotten even better with this round of updates, and we expect it to keep improving over the coming months. YouTube continues to stand alone as the oddly shaped hole in Roku's streaming-channel library, which can certainly be an issue when you're searching for cat videos, but an abundance of premium content helps keep that issue hidden in the background most of the time.
Any failure of the Roku as the one true set-top box similarly fades when you look at its competition, all of which falter in one or more areas; whether DVR, game console, media player or HDMI-connected PC, they suffer from complicated UIs, subscription fees or high upfront prices that the Roku just doesn't have. We just want to lean back and watch, and despite having room for improvement, the Roku 3 still does that cheaper, faster and better than the rest.