The third alpha release of what will become Drupal 7 is now available for testing. The most notable change for developers is Drupal 7 now ships with jQuery 1.4 and jQuery UI 1.8. They've also fixed a number of critical issues since the previous alpha, most importantly one that caused passwords to be stored in plain-text under certain conditions.
Changes since DRUPAL-7-0-ALPHA2:
More details: http://drupal.org/node/748690