WinRAR 5.0 introduces the new RAR 5 format. What you need to know
RARLAB has released the first beta version of the upcoming WinRAR 5.0 archive manager today. The new version is available for download on the official homepage for 32-bit and 64-bit versions of the Windows operating system (English language only). Probably the biggest new feature in this WinRAR version is the new RAR 5.0 archive format that the program ships with.
What this means is that WinRAR 5.0 users have the option to create standard RAR archives but also archives that make use of the new compression algorithm. Why that is important? Because third party programs may not support the new format right when it comes out.
Example: you are compressing files with the new RAR 5.0 format and transfer them to a friend's computer. The friend uses an older version of WinRAR or a third party program like 7-Zip. The files cannot be unpacked as a result on the friend's system as the new format is not supported by the programs that the friend has available on the PC.
7-Zip users who try to extract a RAR 5 archive will receive the error message that it can not open the file as an archive which may lead to the conclusion that the archive is corrupt if they do not know about RAR 5. There is no indicator whether data has been compressed with RAR or RAR 5 so that it is likely that at least some users will run into issues when they try to open these new formats.
RAR 5.0 is not auto-selected though when you create archives in WinRAR so that only some users will experience those issues. It is also likely that third party programs like 7-Zip will add RAR 5 support to their programs in the near future.
For now, it is recommended to use the RAR 5 format only if you are certain that the recipient knows about the new format as well and has WinRAR installed on the system.
RARLABS have created a tech note that describes the new RAR 5.0 format in detail. You can download a beta version of the upcoming WinRAR 5.0 application from the developer website. It may come in handy if you receive a RAR file that you cannot open.
Update: The final version of Winrar 5 has been released yesterday on September 3, 2013. The new Rar format that it introduces is not selected by default, which means that most Rar users will probably not use it immediately for archiving purposes.