In spite of a version number that suggests it's only a minor update, the spec represents a significant step up from HDMI 2.0. Underpinning everything is a new cable, the Ultra High Speed HDMI Cable, that supports data transfer rates of 48 gigabits per second. The new cables are backward compatible with older HDMI specs—they use the same actual plugs and sockets—but support substantially faster connections than the 18Gb/s of HDMI 2.0, let alone the 10.2Gb/s of HDMI 1.4.
What can you do with all that bandwidth? More resolution, higher frame rates, and more color depth. With the new cabling, HDMI can support uncompressed 4K video at up to 120 frames per second, with high dynamic range color with up to 12 bits per channel. Cut back in one or more areas and you can push further in others; limit your framerate to 30fps, and the spec will support uncompressed 8K 12-bit video; use chroma subsampling and it can hit 60fps at the same resolution and color depth.
HDMI 2.1 also allows video streams to go beyond the 48Gb/s limit with a new feature called Display Stream Compression. This feature compresses the video stream on the fly, allowing for notional data rates of up to 128Gb/s, for chroma subsampled 120fps 12-bit HDR 8K video. And if 8K isn't enough pixels for you, there are a number of 10K formats supported for a 10,240×4,320 resolution, intended for specialized commercial applications.
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