Path Finder (PF) completely replaces Finder, and this means that it also replaces (if requested) the desktop view. After installing PF it is recommended you login out and back in again, so the desktop switches completely to the new interface.
On version 4.0 there are a number of new great features, the most notable being tabs. Users can now have multiple views open and instantly switch between them. Additionally, there is a Safari-like bookmark bar now, but I was personally never a fan of bookmark bars.
Another great addition is the "Select" ability of PF. Now you can enter the extension name for the kinds of files you are looking for (e.g. "png") and PF will highlight all the PNG files on the current file manager view. Hopefully, this system will extend beyond just extensions but will involve parts of filenames and become conditional (using AND or OR).
PF 4 uses Mac OS X's PDF and Spotlight engines to display PDFs and search for files respectively, but they licensed Allume's Stuffit engine which is now fully integrated. Most compression formats are now supported via this engine, natively in the program.
Other, smaller new features include slideshow support, new shelves (folder history, file history, selected item patch, and user-selectable folder contents), icon previews for up to 256x256, replace-all/skip-all alert windows, etc.
We only used Path Finder 4 for a few hours as its release is very fresh, but it appeared exceptionally stable and spiffy. Try it out for yourself if you are running Mac OS X 10.4.