After you download and install the new version of Picasa it will start scanning photos and create groups of similar faces. Once done you can access all the pictures under a group called Unnamed People and start adding name tags to sets of photos.
In addition to that it will also auto-complete the names if you are signed in to your Google account. In future whenever Picasa scans new photos it will automatically suggest you names for it.
If you take pictures in various locations there is some more good news. Picasa now also includes Google maps integration which will allow you to easily geo tag your photos. You can also continue to Geo tag your photos using Google Earth.
To make tag management better, Picasa 3.5 also includes a quick tag functionality to quickly access tagged photos.
There are also improvements in the Picasa web album uploader where you can select to upload only starred items from imported photos without having to select individual photos.
Watch a video featuring the latest features in Picasa 3.5.
Find out more about the new features in Picasa 3.5.