The first Iron Man movie was solid. Good characters, great effects. The weakest part was the villain. The motivation was to... kill Stark, take over the company, and be CEO, raking in the cash? Seriously? You want money, and you jump straight to murder? Stark was a playboy, and very unfocused. I'm sure if you just asked for a raise, he'd give you one. Or try some nice white-collar crime. Embezzlement is very in, lately. But still, despite that, it was a good movie. Does the sequel measure up? Well, yes. The characters are still good, the effects are awesome, and the villains are powerful and clearly motivated this time.
Stark's ego compels him to keep the Iron Man technology for himself, and then use it extensively. The use creates a by-product of palladium expended from the miniature arc reactor and in to his body. How? I dunno, the movie never addresses it. But somehow, this is killing him slowly. That knowledge drives him to self-destructive behaviour. You get brief flashes of introspection, quashed by those around him, since they're only used to his frivolous side. It rather makes sense. Apparently, there's no other possible reactant to use, so it's use the palladium or die immediately. Due to his impending death, he starts doing things like giving away his art collection, and appoints Pepper CEO of Stark Industries. Great character arc for Stark.
Since it's his movie, he's not allowed to die, and SHIELD shows up, deus ex machina's him some extra time, he gets inspiration, cures himself, and gets a suit upgrade at the same time. I'm glossing over this point because it's rather obvious that he's going to get cured (it's HIS. MOVIE.), but it's still a well-done sequence.
Remember what I said about the villains being powerful and motivated? Well, this time, the primary villain is Ivan Vanko, son of the man who helped Tony's father invent the arc reactor. Ivan's just as smart as Tony, and builds a miniature arc reactor from his father's blueprints and goes out to frak up Stark something fierce because he blame's Tony's dad for getting the Vanko family sent to Siberia. Vanko ends up in jail, only to be broken out by the resources of Justin Hammer, who is Stark's business competitor and rival. Hammer wants to use Vanko's knowledge to build his own version of the Iron Man suits. That goes very wrong, and leads to a freaking awesome fight scene. Go watch this movie.
Lastly, at the end of the credits is the teaser for the next Marvel movie, and pretty solid confirmation that they're working towards an Avengers movie. How everything will tie in, and who will be the villains of that, it's probably too early to say. The clues so far are Iron Man being included, Nick Fury, SHIELD, and something to do with the Hulk, or at least General Ross, as Stark showed up to recruit him at the end of the Incredible Hulk, which also had a reference to the super-soldier serum for Captain America, plus the stinger on Iron Man 2, which I won't spoil. All the building blocks are there, we just need to see them assembled. It's going to be a wild ride.