I just switched from the built-in Terminal.app on Mac OS X (which I've always liked) to iTerm2. Here's some of what I like about iTerm2 :
- borderless windows
- better scrolling and mouse support (or better defaults?) I can use my scrollwheel in vim by default and clicking on a word moves the cursor which is a nice bonus (behaves like unix)
- feels faster; I was having issues with Terminal which seemed to be related to using Microsoft's Consolas font coupled with transparency and blur which was causing ever so slight but hugely annoying key lag in vim. (key lag in vim? really?)
- remap the modifier keys!!! This was actually the reason I started looking for an alternative because my mac's "option" key is where I expect my control key to be and it was a source of continual frustration in vim and elsewhere. I remapped Left option to be a control key and life got better.
Check out the features page for a full list of goodness offered over the default Terminal application shipping with Mac OS X 10.8 and below... bunch of features I have not even started using yet