WELCOME ABOARD!
The bad: SH3's graphics are not up to the same standard. If that doesn't bother you, continue reading. SH3 doesn't have the automated crew rotation or the cool 'General Quarters' features of SH4. As for u-boats, you can actually play them in SH4 too, if you have the U-Boats add-on (patch 1.5) and Lurker's marvelous Operation Monsun mod. Also SH4 U-Boats is the only version to have both latitude and longitude coordinates and Kriegsmarine grid squares.
The good: SH3 has several amazing supermods available, as well as hundreds of other small mods. SH4 has nothing to compare with the overall experience of SH3. With the right mods you can traverse the Kiel Canal, stopping to wait for the gates on the canal locks to open and close. A huge amount of merchants (more than 100 different types) await your pleasure. With SH3 Commander every ship you sink generates a real name, crew number and cargo type in your patrol report (as well as a host of other cool functions).
To put it simply, SH3 is the most primitive of the three current incarnations. It is also far and away the most developed of them all, benefitting from seven years of constant mod attentinon. It has the most rounded campaign.
For an example of what SH3 has to offer, check out this thread:
http://www.subsim.com/radioroom/showthread.php?t=170090