Its working fine here. If I am in a dark room and walk into a bright room, the screen gradually gets brighter.
If I am in a bright room and walk to a dark room, the screen stays bright until you either sleep & wake the device, or let the display go idle and start using it again. Personally I wish you could turn that idle time off though, and/or have fine-grained control over display sleep as you can with Macs.
I have my iPad set to lock with a secure password immediately, which is a nuisance if the sleep time is short. If I set it to five minutes, it keeps dimming while I am reading, but 10 minutes is longer than I would prefer to leave it on before locking. Id rather have six minutes with no dimming before sleep, and a five to ten second grace-period, rather than a full minute. With a MacBook, that seems to about the right length of time to read at a casual speed, but not so long that you are running the battery down.
You may need to reset your device settings if it isnt working for you.