nLingual 2 is a complete overhaul. The overall functionality is the same, but the actual handling of almost everything has be rewritten from scratch. Once nLingual is updated and the new version is installed onto your site, you must reload the page to make sure the upgrader kicks in, since WordPress does not actually load the new plugin code during the update procedure.
The upgrader will automatically migrate all options and language/translation tables to the new format, and will ask you about automatically converting the name-split terms to the new format (they will still function without them). This process make take a few seconds depending on your server's speed and how larger your translations table is. The upgrader will also enable compatibility mode, enabling use of the old functions that were not deprecated by version 1.3.0.
Although the upgrader should take care of any API related compatibilities, any custom or 3rd party code will likely fail to work. For a full checklist of compatibility concerns, please visit the GitHub wiki page.
It is strongly advised that you test this update on a development copy of your site, to determine if there are any conflicts or errors due to incompatibilities with your themes/plugins that tie into nLingual.