[Disclaimer: I'm merely a KDE user, hardly involved with the KDE development processes; my criticism is based on what I see as a user, I'll be glad to be corrected in the comments]
Back when I started my way with Linux with the brand new RedHat 6.0 (which as always, preferred GNOME). KDE always went forward: KDE1 was pretty.. basic, KDE2 was a big step, and same goes from KDE3. I've been using KDE 3.5.x for quite a long while (RHEL/CentOS5 and Debian sid until recently). 3.5.x symbolizes, in my opinion, the last "winning' era of KDE: It had the right features, but more important: it was mature and stable.
KDE 4 introduced important improvements:
- User interface continued the tradition of being much nicer than its predecessors. Compare for yourselves: KDE 1 2 3 4
- Very nice OpenGL effects were added with two important advantages over GNOME+ Compiz: the OpenGL features are fully integrated inside KDE, configuration is way easier (Compiz configuration tool is scary), and the attitude is more towards productivity and less toward eye-candiness. For example, instead of the useless wobbling windows and water effects of Compiz, KDE provides the useful feature that displays all open windows and allows search-as-you-type for choosing the right application by its name, by simply putting the mouse pointer on the top-left corner.
- Simplified user interface: the developers had the courage to do some rewrites and strip complicated GUIs, even lose some features, and make the new KDE 4 apps more simple. This is mostly notable in konsole and amarok.
But, it also got worse than its predecessors on some areas: