Fable 2 improves enough on the first one to make it superior overall despite some short comings.
Fable 2 has a similar plot to the first Fable. It's set 500 years after the first game. The world of Albion no longer believes in magic nor does it believe in the three heroes of strength, will, and skill. The concept of a hero is dead until your character, known as little sparrow in the beginning, is met be Lord Lucien. What ensues is a revenge tale where your hero attempts to avenge a wrong done to him and it's a fairly cliche plot in this respect. What Fable 2 does do well plot wise though is include some pretty great dream sequences. Your hero feels far more real then it did in the first Fable game. This is due to the fact that the story feels more personal. You'll see why if you played both games. What is also great about Fable 2's plot is the game has many characters which are great. There are some hilarious characters such as Reaver and there are also some characters that provide a more serious overtone. Lord Lucien is of course a notable badass but compared to Jack of Blades he doesn't feel as evil but I believe this was intended.
Of course though, Fable 2 isn't really about the story. It's a nice thing to have and it's well done enough but the chunk of Fable 2's fun comes in the gameplay and the sheer amount of choices you have. After all the game is about choice right? What Fable 2 does a lot better then the first is show you the magnitude of your decisions. One of my major complaints about the first Fable is the shallow good and evil system. This game totally fixed this and made it better then I could have hoped. Essentially everything effects your good and evil status even doing things like pulling a weapons out in a city or threatening someone. People will also grow to hate you and fear you or love and respect you depending on your actions. Unlike in the first Fable, actions you do outside of quests also effect your reception from people around you. Also unlike the original, people react in a far different matter to you depending on your good and evil status. There is also a new corrupt and pure system which helps to determine just how evil or good you are. This is a great system and allows for you to repent but if you go fully corrupt or fully pure you're never gonna change. All your choices are also nicely reflected in the regions. For instance clearing out the bandits in one region can make it thrive and grow. Leaving the bandits and helping them out can make it a dark dank nightmare. The new good and evil system is awesome and it has been finally fully realized.
Combat has also been changed for the better. Whereas before the combat was a little bit clunky, the combat in Fable 2 is far more streamlined and it works extremely well. It also looks great and the finishing moves, slow motion sequences, and spells look awe inspiring. The level up system also allows you to do new attacks and new ways of attacking. The combat in the game is very free form, you can approach things however you want and you can either focus on your wizardry, dexterity, strength, or you can be a hybrid. It's much better then the first Fable.
There is also a lot to do in Albion, the quests are much longer and a lot more fun then in the first. They are also more varied. This helps to increase the longevity of the game. Jobs also are surprisingly fun and provide a nice distraction. Relationships, marriage, and family are all fine and dandy and hunting for treasure is also great. The UI has also been improved. In the first Fable to upgrade stats you had to go to the hero's guild and then pick things to upgrade. In Fable 2 you just press up on your D-pad and you're there. Fable 2 is a far more streamlined game then the first and it is much easier to play. Another example of this is the bread crumb trail which leads you to the objective of each quest. You can either follow it linearly or go off and find treasures and such. It works well but can make the game a bit too easy.
The last notable gameplay addition is the dog. I love my dog and it is exactly as Peter Molyneux promised. It hunts for treasure, it can attack, it provides companionship, and it never gets in my way. I've never had a problem with my dog and it is something I can not live without. I wonder how I got through the first Fable game without it. I wish real dogs were like this. The dog also changes it's good and evil status depending on you which is a nice feature. It also will always find you and never get stuck.
Fable 2 is a visually appealing game and it has some areas that are simply awe inspiring. The colours in the world make it looks simply amazing and the player models all look great but they do suffer from being a bit repetitive. There are also some dry looking regions but the great looking ones overshadow this. The sound in Fable 2 is also great though it is a little repetitive. You'll hear the same score over and over again and you'll hear the same voice actors over and over again. The main voice actors are good though and that is all that truly matters.
Sadly the worst feature in Fable 2 was also one of the most anticipated. The co-op feature is quite disappointing and it is not a lot of fun. It is cool to see your friends world but the restricting camera, henchmen status, and the lack of player interaction makes this co-op experience forgettable. It's not a huge loss though but it's still regrettable it went in this direction.
Overall Fable 2 is a great game which will suck you in for hours on end. The game is well done for the most part and is for sure a notable quality increase over the first Fable. The new features will have Fable fans coming back for more. Of course though I wholly encourage anyone to get this game. It's a great value despite the short campaign but it has many hours of side quests to make up for it. Albion is well worth revisiting and I hope you give it a try.
Pros: Great cast of characters, great quest variety, good and evil system has a massive overhaul, the dog is the best, combat is a lot of fun, visually appealing...
Cons: ...though some parts could have been better, bad co-op, plot could use more substance
Overall: Fable 2 is everything Molyneux promised. It is a superb game worth checking out.