Just updated my Lumia 520 to Wp8.1. At least for me, the "Folder on Start" feature does not work. (I have seen some websites referring to the feature as "Tile in Tile.")
So, I am still stuck with the "App Folder" app for now. It is not as transparent, but the app does a good enough job.
A list of the new features can be found at http://www.windowsphone.com/en-us/how-to/wp8/basics/whats-new-in-windows-phone and http://www.wpcentral.com/windows-phone-81-features.