Since the Blender interface and code was totally rewritten from scratch, starting with the 2.5 series and throughout the production of the "Durian" open movie "Sintel", a lot of good things happened to this famous open source 3D modeling and animation suite.
One of them has been the announcement, in April 2011, of Cycles, a new rendering engine developed by Brecht Van Lommel with the goal of modernizing Blender's shading and rendering systems and to be used as alternative to the Blender Internal rendering engine.
Cycles has finally been fully integrated in Blender with the 2.61 release as an add-on, which is a Python script, enabled in the Preferences panel by default: it's enough to set it as the active render engine in the UI's top header.
Just as Blender Internal is a scan-line rendering engine, Cycles is instead a physically based path tracer; this approach permits the simplification of materials' creation, the support for Global Illumination, and in the end much more realism in the results.
But the best Cycles feature is probably the rendering interactivity you have in the 3D viewport. By setting the draw mode of any 3D viewport to Rendered, an interactive rendering starts in the viewport itself and since then the pre-visualization rendering of the scene is continuously updated almost in real time (depending on the power of your graphic card) as a material, a light, an object, or the whole scene gets modified.
Currently, BI is still maintained (even though, no more developed) and there are no real plans to drop it, at least for the moment. It's not clear if in the future Cycles will totally replace BI or if both will be (hopefully) kept as possible choices. What is clear is that presently Cycles is still missing several of the features possible with BI, such as smoke simulations, stress mapping, and others.
This doesn't mean that Cycles is not production-ready; a lot of astonishing images have already been produced, both for testing purposes and for real productions as well. You can find most of them on the BlenderArtist forum (http://blenderartists.org/forum/), but it's enough to mention "Tears of Steel", the fifth open movie produced by the Blender Foundation with the codename "Mango": a science fiction short movie entirely rendered in Cycles to accomplish the visual special effects. Well, maybe not entirely but actually at 95 percent: the team still used BI for the unsupported features. In fact, being included in the same software also provided with an integrated compositor, both the Blender Internal and the Cycles render engines can actually be used in tandem to get full use of all the needed features from both of them.
The best of two different worlds.
Chapter 1, Overview of Materials in Cycles, explains the way Cycles materials work, their main characteristics, and how to build a basic Cycles material, add textures, how to use lamps, or light-emitting objects and set the World.
Chapter 2, Managing Cycles Materials, explains how to better manage and organize the Cycles materials to build libraries to link or append the materials from.
Chapter 3, Creating Natural Materials in Cycles, explains the creation process of several types of basic natural materials by using both image textures and procedurals, but mainly dwells on procedurals.
Chapter 4, Creating Man-made Materials in Cycles, explains the creation process of several types of man-made materials by using procedurals textures.
Chapter 5, Creating Complex Natural Materials in Cycles, explains the creation process of more complex natural materials by using both image textures and procedurals, but mainly dwells on procedurals.
Chapter 6, Creating More Complex Man-made Materials, explains the creation process of some more elaborate man-made material by mainly using procedurals textures.
Chapter 7, Creating Organic Materials, explains the creation process of several types of organic shaders, trying to use only procedural textures wherever possible.
Chapter 8, Human Skin Materials and Faking Sub Surface Scattering in Cycles, explains some ways to simulate the Sub Surface Scattering effect in Cycles and teaches how to build simple and layered human skin shaders. This chapter is available as a free download and can be downloaded from http://www.packtpub.com/sites/default/files/downloads/Chapter_8.pdf.
Chapter 9, Special Materials, explains the usage of the Cycles "hair" experimental feature and the creation process of some special effects material. This chapter is available as a free download and can be downloaded from http://www.packtpub.com/sites/default/files/downloads/Chapter_9.pdf.