You will say "wow".
Nintendo's initial demo of the 3DS system, immediately following the E3 press conference, consisted of several character dioramas starring Mario, Link, Bowser, Pikmin, etc. Each scene was frozen in time but could be rotated with the new "slide pad" joystick. This new control interface is flat like the PSP nub, but it has more tension and feels more like a traditional joystick.
But you want to know about the display. I literally said "wow" when seeing it for the first time... and the 3D effect wasn't even turned on yet. The visual fidelity is on par with GameCube or Wii, with character models covered in shiny, bumpy textures just as in games like Super Smash Bros. Melee/Brawl. (In fact, this whole demo was just like the pause screen in Smash.) Combined with what we saw in the Kid Icarus Uprising trailer, it's clear that 3DS is a graphical powerhouse at least on par with PSP, if not better.
Then I cranked up the 3D slider. The characters immediately popped out of the screen, an effect that can be shocking at first sight. It looks exactly like the 3D effect you've seen on Avatar and other 3D films, only without the glasses. In fact, the effect might be even more convicing when you have direct control over the camera angle. Over and over, through two full cycles of the demo, I moved the slider up and down, comparing 2D to 3D and back again. The visual quality is exactly the same in both modes, and the display doesn't stutter or show any other reaction to the slider moving, except to increase or decrease the apparent depth. I did find that the 3D mode has a narrow viewing angle, and it looks extremely blurry if you tilt the screen away in any direction. Of course, going back to 2D removes the blur and allows you to view the screen at any angle.
I also took some time to examine the system's other details. There is a raised rim around the touch screen, and the area below the touch screen is extended to the bottom of the system, so that the Select, Home, and Start buttons all sit on a raised platform. The D-pad, face buttons, and shoulder buttons were shiny on this unit, but otherwise feel just like those on a DSi.
On the back of the system is a game card slot in the familiar location, but with some differences. The mouth of the slot is wider and deeper than before, implying a new physical medium to thwart piracy. However, a look into the slot reveals a shelf that narrows the slot to the size of the original DS game cards. It seems likely that your old games will slide into the same unified slot as new 3DS cards, just leaving some space near the top. New game cards will be larger at the top but should retain the original size down at the bottom, on the side with electrical connectors. Next to the game card slot is a stylus hole, but the demo units didn't have a stylus for us to try. Next to that is a small, black rectangle that appears to be an infrared sensor. This feature wasn't mentioned during the briefing, and so far we don't know what it might be used for. Along the side is an SD card slot, just like you'd see on the DSi.
One last observation: the bottom half of the 3DS has a beveled edge that makes it look like two layers glued together. When the system is closed, this bevel makes it look like there are three layers to the system, when of course there are only two. The system has an overall size and weight similar to the DSi, with the top (3D) screen being somewhat wider but certainly not huge or system-wide as suggested by rumors.