Not so much as an improvement of Dead or Alive 2, but more of a tweaked version...
Now then, DOA 2 was superb, it had just about everything a fighter needs. Dead or Alive 3, however, comes across as a more updated version of DOA 2 but with a few ticks taken out. These removed things aren't really important, just the UPS mode and other minor things such as more detailed statistics and you're total play time... yes, that's all that's been taken out. Sure, there appear to be less costumes to unlock, but it's made up with the ability to change the colour of a player's costume. So all's well.
The graphics are improved, it's clear to see from the start that Dead or Alive 3 is a good looking game and possibly one of the best on the Xbox. The animations look superb and it's great to see some nice special moves.
All the characters from DOA 2 are still here, however, one of which needs to be unlocked... Let's just say you may recognise the new 'Hayate' character. New characters include white haired assassin Christie, drunken-fist fighter Brad Wong and karate cutie, Hitomi. Oh, and of course the reconisable, Hayate.
The modes of DOA 3 still include the usual, Story Mode (which is much better than the DOA 2 version), Sparring, Tag-Team, Versus, Survival, Watch mode... again, the usual. Some of the modes seem much more improved, for example, you can now play tag-team survival or even tag team practice.
The basic line is this, think of Dead or Alive 3 as more of a major update to the Dead or Alive 2. There are a few great tweaks here and there and new characters to play (including new arenas) and of course, the graphics look much better.
Either way, Dead or Alive 3 is still super brilliant fun.