Jim, The actual difference, which you really after are:
Supercaps installed on board no battery needed.
Runs all LED lights, no bulbs
Loads two files one is the engine characteristics and the other is the sounds. This provides more flexibility with keeping original engine operating characteristics (speed profile, light features and such), but going with any type of sound. PS-2 used one files so if you liked a different whistle, you might also get different light characteristics and speed depending on the file used.
PS-3 can load PS-2 sound files
Has DCC and DCS and can pickup DCS signal on either rail automatically. This allows 2 rail operators to do more. PS-2 needed a selector switch for 2 rail DCS selection.
A few other things. G