Second life’s closed beta started sometime November 2002. April 2003 marked the start of public beta, the following things were introduced:
A self-contained economic system which Linden lab says was an attempt to regulate the use of resource in game by charging users for creation of new objects. Initially, “rezzing” an object (An in-game jargon which means creating a new object) cost L$10 per “prim”.(an in-game jargon that denotes objects like spheres and cylinders; supposedly from the word “primitive”)

At this point of the beta, Linden Lab charged users a fee of L$3 per prim to keep objects in-world. A more complex system was developed not long after; a system which calculated taxes based on the volume of each prim and its altitude.. Additional taxes were introduced for Objects that required hardware-rendered light sources. This costs L$5.00.

With the introduction of Beta 1.0, the only noticeable difference was the login screen. Many say, that this is just a version number change. But a notable release during this time was not changes on the game itself but documentation. A 102-page PDF file was released by Linden Labs covering almost every aspect of the game was released. Check out the PDF file here

With the release of version 1.1, the economy was revised and was geared towards reduce tax evasion by residents. There were a lot of significant in-game events, the most prominent of which was the virtual death of Americana , one of the games most prominent players during that time.
A few changes were implemented graphics-wise as well like new textures for terrains, the animation of in-game character clothes and hair. Environmental texture mapping such as shine were introduced as well. New API’s were introduced in this release too such as a new particle system and vehicles.

Bigger changes were seen in light of the release of Version 1.2, the most significant of which has to be the social reorganization. A lot of the residents say that after the release of version 1.2, the game shifted focus towards the economy and everything, all of a sudden, was all about the money.

The following outlines the changes in version 1.2:
The system got rid of taxes and was replaced by a new land model
Land was taxed higher in the sense that SL residents were provided with an option to pay high L$ rates per month, or in lesser real life money payments.

The improved User interface and the ability to change colors by editing the colors.ini file

Scripting support was enabled and for the first time, users were given the option to create new dialog popup boxes in-game.

For the first time in SL, Version 1.3 scripts were allowed to communicate with the “real world” via email and XML-RPC. Users can compose an in-game instant message and send it as an email. Click

Version 1.4 on the other hand, allowed users to create custom animation for their avatars. This created limitless possibilities in terms of social interaction as user avatars can now express themselves better. Another key feature that was introduced in version 1.4 was streaming audio; which caused the rapid proliferation of in-game “clubs” where users can hang out and socialize all while hearing streaming music being played by the club owners.

Version 1.5 was supposed to be a minor update/bugfix but turned out to be one of the buggiest Second life releases ever. This release focused too much on server-side tweaks and changes to support upcoming releases but failed to allocate enough time for bug-testing.

In Version 1.6 users first saw streaming video and an improved User Interface for rezzing and a host of other tweaks and bug fixes. Click for the official release notes for version 1.6

For version 1.7, Linden Lab intended to introduce Havok 2 (which is a powerful physics engine used to power games like Half life 2) in the game. This was pushed back and rescheduled for future releases though and instead added new features like a script schedulers, HUDs and a monitoring system to gauge the stability and performance of the scripts.

The LindeX (The Linden Currency exchange) was also introduced in this release. The Lindex provided users with a convenient way to buy or sell $L using real life money. This was convenient for the in-game entrepreneurs as their monthly membership or land ownership fees can be paid directly with real life money they got from LindeX transactions.

Version 1.8 unlike previous releases, only came with two new features. One of them is the introduction of Point to Point teleporting and a graphics tweak called “Water rippling”. This simply means that with the proper reflection, immersed in-game objects were rendered with natural-looking waves. A small group of beta testers were also tasked to test SL for Linux. Dubbed Linux Alpha, the project was initially launched as a closed beta but was released to the public not long after. Read about it

Version 1.9 featured major changes in SL’s back-end. Things like IM’s, item transfers as well as teleports were changed from central server communications to localized interaction. Other features that came with this release were nifty camera script-run camera controls and an improved real estate tool.

Additionally, minor fixes on Version 1.9.1 included hardware-accelerated lighting and flexible prims. The aforementioned changes paved the way for the release of Version 1.10 which dramatically changed how the game is played for new users. On May 2006, stipends for new free basic accounts were discontinued and new accounts can now be created without the need for credit card verification. This move stirred mixed reactions within the community primarily because this increases the chance of minors accessing grids marked as “adult”.

For a more detailed history of SL releases, check out the SL history wiki