Template:M summ 2002 ISDA 14

The basic reason for the differences between the different editions:

The 1992 ISDA was introduced principally, to:

Expand range of products covered: Expand beyond interest rate and currency swaps.
Netting: Enhance and strengthen close-out netting.
Market developments: Reflect market developments — the period between 1987 and 1992 was a massive growth in the swaps market, and lessons were learned.
Physical delivery: Allow for physical delivery of underlying instruments referenced in a swap (the only “underlying” for rates and fx is cash, so the 1987 ISDA only needed to contemplate the payment of cash).
Settlement Amounts: Introduce greater flexibility for determining Settlement Amounts on termination of Transactions (introducing the Loss, Market Quotation, First Method and Second Method regimes thereafter replaced in the 2002 ISDA by Close-out Amount).
Two-way payments on termination: Under the 1987 ISDA a Defaulting Party is not entitled to termination payments. This is the so-called “limited two-way payments” provision which was a large part of the reason 1987 ISDAs were not reliable on netting.
Settlement netting: more flexibility for netting groups of transactions under Section 2 - under the 1987 ISDA you could either net just within a single Transaction or across all Transactions but not, as standard, across a given subset of Transactions.

The 2002 ISDA was introduced, primarily, to:

Loss/MQ begone: Finally take out to the woodshed the whole Loss/Market Quotation farrago (and all that First Method and Second Method nonsense) by introducing the Close-out Amount.
Reference market makers, Settlement Amounts also begone: That meant no need for Reference Market-makers, Settlement Amounts and so on so they went too.
Force majeure: finally make an honest man out of , well, God, by adding a Force Majeure Event under Section 5(b)(ii) — hitherto parties had boshed up something custom each time.
Waiting Time for Illegality: The 2002 ISDA builds out Illegality to include the Waiting Period concept (also used in Force Majeure Event come to think of it).
Set-off: To finally end the gruesome cottage industry of half-arsed, half-witted set-off provisions that don’t really work, by providing an express, fully-arsed half-witted set-off provision that doesn’t really work (Set-off under Section 6(f)).

Here, for handy reference, is a list of all the definitions used in this edition of the ISDA Master Agreement: