I think the original AirTag is in relative terms the best product Apple has ever made--it really does "just work", does exactly what it says on the tin exactly as well as promised, and basically feels like magic when you need it.
Everything here is unsurprising but solid improvements, particularly the watch find. I personally would have traded holder-backward-compatibility for even a slightly smaller form factor, but I can accept for most uses the current size is sufficiently small and people would rather not have to get new keychains or whatnot.
I remain mildly curious why Apple continues to call this out, since there's nothing as far as I can tell that would pose any risk to a pet that's greater than if it weren't attached to their collar. People put tags and bells on their pet collars all the time, how is a similar-sized AirTag that emits a minuscule amount of radiation any different?
Yes, a dog could swallow it, but I'd guess they're far less likely to eat something on their collar than they are something that isn't on their collar--I've never once heard of a dog eating its own tags.
Fear that the battery could hypothetically leak and cause skin burns? The new one is IP 67, so I'd think even if it DID somehow leak (which I've never seen a coin cell do), it wouldn't escape the case.
In any case, they're incredibly useful for keeping track of an outdoor cat. I recently adopted a stray (or maybe feral) cat (or maybe more accurately it adopted me), and prior to it deciding to move into my house one of the folks feeding it put a collar with an AirTag on; being able to figure out where that little critter was was incredibly valuable, not to mention interesting. That cat, it turned out, would do a circuit to places a half-mile away on a nighty basis.