I cannot wait for Fable 2! the original was amazing.. too short but amazing! here are some confirmed details, below:

• Mini-map has been replaced with a "bread crumb trail;" a dynamic golden line on the ground that directs you to a destination (read: medieval GPS)
• Magic system is divided into focused, single-foe attacks and ranged attacks; attacks can be built up into five levels using various spell combinations
• Speaking of spells, there'll be just eight (but remember, they can be combined)

• Every house in the game is up for sale; each house will unlock a sidequest, item or skill
• Rough estimation: 20-30 times larger than the first Fable
• The gameworld features seasons and dynamic weather
• Cutscenes are interactive; the d-pad can be used to issue certain gestures that will steer conversations
• Sex minigame was canned; instead, screen goes dark and moaning ensues (sex can still be unprotected though! Babies, yes; STDs, unconfirmed)
• Female character was almost canned; almost.
• And finally: Three more Fable sequels are being planned. (Lionhead is currently wrapping up Fable 2 and focusing on an announced project.)

+ Screenshots, here

+ Information, here