In Hadoop 1.x, MapReduce is responsible for both processing and cluster management whereas in Hadoop 2.x processing is taken care of by other processing models and YARN is responsible for cluster management.
Hadoop 2.x scales better when compared to Hadoop 1.x with close to 10000 nodes per cluster.
Hadoop 1.x has single point of failure problem and whenever the NameNode fails it has to be recovered manually. However, in case of Hadoop 2.x StandBy NameNode overcomes the SPOF problem and whenever the NameNode fails it is configured for automatic recovery.
Hadoop 1.x works on the concept of slots whereas Hadoop 2.x works on the concept of containers and can also run generic tasks.