Yup, they are majorly different! Same situation on the iPhone 4. The rear camera is that nice 8MP one that they've been talking up and advertising, while the front one is a VGA quality one that's about on par with the camera in the original iPhone/iPhone 3G.
The front facing one is good for FaceTime calls, or if you want to take a picture of yourself, but not a whole lot else. Oh, and it can be rather useful as a "mirror". I've had the need to check to see if there's something on my face before and I've used the front facing camera's live preview in the Camera app to do so.