The resolution's most important feature is the "land for peace" formula, which implies Israeli withdrawal from territories it has captured in exchange for normalization and achieving peace agreements with its neighbors. This was an important advance at the time, considering the fact that there wasn't a single peace treaty between Arabs and Israel until Israel-Egypt Peace Treaty signed in 1979.
For obvious reasons, the U.N. could not force the relevant parties to make a peace agreement, nor would the rather ambiguous resolution have precedence over bilateral negotiations; however the resolution was the focus of numerous semantic disputes.
The resolution advocates a "just settlement of the refugee problem" but doesn't specifically mention the Palestinians (who were not represented in the debate). This was one of the declared reasons why PLO didn't accept the resolution until 1988; another was the refusal to recognize Israel's right to exist in accord with the Khartoum Resolution of September 1, 1967. The UN resolution, however, did serve as a basis for Israeli-Palestinian negotiations (Palestinians being represented by the PLO) that led to the Oslo Accords. The Accords' main premise, the eventual creation of a Palestinian state in some of the territories captured during the Six-Day War, in return for Palestinian recognition of Israel is obviously reminiscent of the "Land for Peace" principle.
Both Israel and her neighbors accept the legitimacy of 242, although the two sides interpret the resolution to mean quite different things. The two sides also disagree over the implementation of the resolution. Israel generally focuses on the latter part of the resolution first, which calls for the "termination of all states of belligerency" in the area. Thus, the refusal of the Arab states to end the state of war that exists represents a material and continuing breach of 242, making Israeli security control of the occupied territories a continuing necessity. The Arab states, however -- especially more radical regimes such as Syria -- have always maintained that full Israeli compliance with 242 is an indispensable prerequisite to any negotiations, and refuse to consider official negotiations with Israel until it complies (many of these regimes, of course, have engaged and continue to engage in unofficial "closed door" negotiations with Israel outside of public scrutiny). This continued disagreement continues to be reflected even in Israel's peaceful relations with more "moderate" neighbors such as Egypt and Jordan, and is still a major stumbling block in negotiations between Israel and the Palestinians -- the former insisting upon an end to terrorism as a prerequisite to negotiations, the latter claiming Israel's continuing violations of 242 as one of the justifications for their armed resistance to the occupation.
Perhaps the most widely disputed element of 242 is the call for "a just settlement of the refugee problem." Israel continues to refuse to consider any large-scale resettlement of Palestinian refugees on Israeli territory, claiming that such a move would undermine the Jewish character of the state of Israel and lead to its collapse. Moreover, Israel points to the continued refusal of the Arab nations to compensate Israeli Jews of Arab origin, many of whom were driven out of their home countries after facing the expropriation of virtually all of their property. Israel's official stand at present is that refugees will be resettled either where they currently live, or in a newly constituted Palestinian state at such a time when it is established. Recent evidence suggests that a moderate Palestinian leadership would accept a "symbolic right of return" to Israel in the framework of an overall peace agreement, along with an acknowledgement from Israel of its responsibility for the Palestinian refugee problem. However, numerous Palestinian groups with substantial political power have stated their opposition to any agreement that does not allow for a full return of Palestinian refugees to their places of origin within the former Palestine Mandate, regardless of whether those places are currently in Israel proper. This argument reflects an even older conflict over the meaning of UN Resolution 181, the first UN resolution to deal with the Palestinian refugees. The refugee issue continues to be one of the most intractable facets of the Arab-Israeli conflict, and continues to hamstring efforts on both sides to implement Resolution 242.