The game starts at the neighborhood level. Here you can create a housing development from scratch or start with one of three pre-made neighborhoods, each with its own theme. From there, you'll settle on a house and a family of Sims to control. Sims now have aspirations, wants, and fears. The wants and fears are the day-to-day things that occupy their minds, like wanting to see friends or get married and fearing death or being rejected for a kiss. Satisfy their wants, and they become more efficient at completing tasks you assign them. Realize their fears, and Sims become lethargic, cranky, and unresponsive to your commands. Aspirations are the big-picture things, like raising a family, becoming wealthy, and gaining knowledge. Succeed here and you'll be able to buy odd gifts for your Sim to improve his or her life, like a money tree that pays dividends or a "fountain of youth" water cooler.
Of course, you wouldn't be able to juggle all that if it weren't for the improved "Free Will" option, which makes it easier for Sims to fulfill their basic needs. The artificial intelligence of the game is noticeably improved; they won't turn on radios just as a family member is going to bed but, strangely, they do occasionally put their dishes on the floor.
Another big change in the series is the concept of the lifespan. Now Sims are born with the traits of their parents, families grow, and Sims grow old. Not only does this go hand in hand with aspirations (growing up is the first aspiration that a baby Sim will have), it provides a limited time with which your Sims can achieve their goals.
The pre-made households all have backstories that are smart spoofs of soap-opera plots--lots of scheming, romance, ghosts, and family fighting.