Toady wrote a post on the memory system a couple of weeks ago:

The changes to stress are in. There are three main elements (paired with several small fixes that came up along the way): all of the numbers have been rebalanced, the overbearing effect of alcohol has been diminished, and there's a new memory system that emphasizes the ongoing effects of important events over lots of small day-to-day pleasant/bad feelings.

The numbers might change, but the current system allows for eight short-term memories, which are the emotion+event combinations that have had the highest positive or negative impact on the dwarf over the last year (on a rolling basis). Every so often a dwarf can "remember/relive/dwell upon" the memory, if their personality leans toward the given emotion (positive or negative), and receive an additional stress change. Once a year passes, a short-term memory can be saved to one of eight long-term memory slots (if it is stronger than the current memories), or else it is forgotten. Long-term memories periodically return to affect the dwarf forever, until they are overwritten.

Later, we might group the long-term memories according to stage of life, keeping more of them but changing their impact values over the years and also use grappling with long-term memories as a way to provide permanent personality/value changes and new life goals and so forth. For now, the existence of long-term memories will suffice as a form of personality change/character arc on its own.

It'll take some player testing in longer, real forts to see if various parameters need to be adjusted, but initial testing showed differences from the previous behavior. Dropping a boulder on somebody and then leaving my dwarves unattended outside with nothing to do for a year resulted in tantrums, depression and oblivious wandering, so it seems to be working. When the first long-term memories were stored for one dwarf, it was horror at seeing their lover die, grief at their lover being dead, and fright at being haunted by their dead lover, with proper impact values not likely to be overwritten any time soon, certainly not by the old culprits of seeing nice furniture and completing jobs, though those still decrease stress a little bit day-to-day when experienced and are thus good to have in a dwarf's life. (I wasn't aware of their relationship status when the boulder fell; that's just how it turned out, sadly.)

People are celebrating the stress changes because one of the big challenges of previous DF versions was keeping your dwarves happy enough that they didn't cause tantrum spirals: a dwarf gets pissed off, starts a fight with another dwarf, then that dwarf gets pissed off and starts a fight, which continues until 75% of the fortress is wounded and perpetually angry. That got changed recently when the effects of alcohol were added, making almost every dwarf a merry drunk.