What is a Sharepoint Solution File? How does it differ from WebPart .cab files in legacy development? What does it contain?

A Sharepoint solution file is essentially a .cabinet file with all a developers ustom componets suffixed with a .wsp extension that aids in deployment. The big difference with Sharepoint solution files is is that a solution:
allows deployment to all WFE’s in a farm
is highly manageable from the interface allowing deployment, retraction, and versioning
Can package all types of assets like site definitions, feature definitions (and associated components), Webparts, etc.
Can provide Code Access Security provisioning to avoid GAC deployments
Just to name a few things…