Though not a block size increase - bitcoin’s block size is still a tiny 1 Mb - the protocol does some significant heavy lifting to reduce the “weight” of transactions on the blockchain, thus reducing transaction times and fees.
Segregated Side Chain
The upgrade stores digital signatures for transactions on a segregated side chain, creating more blockspace on the chain and increasing the volume of transactions.
SegWit also resolves the problem of transaction malleability, - a bug in which a malefactor can tamper with signatures and cause a corrupt transaction to supersede its legit counterpart on the blockchain.
Long Time Coming
The upgrade to full SegWit support has been a long time coming since its introduction in November, 2016 and release last August. Developers had been occupied for most of 2017 with a community kerfuffle over doubling bitcoin’s block-size.
Adoption had also been slow because SegWit has to be specifically enabled on exchanges and wallets, since SegWit and non-Segwit transactions were not cross-compatible.
Version 0.16.0 finally includes support for “native SegWit addresses,” employing the user-friendly bech32 format that supports SegWit transactions automatically.
Other improvements to bitcoin’s code include a default replace-by-fee, allowing users to speed up a transaction by replacing it with a higher-fee transaction, and hierarchically deterministic wallets, which allow the creation of child keys from parent keys.
Images via Shutterstock, blockgeeks