For quite a long time now, Microsoft has been teasing a fairly major overhaul to its avatars system, and as of the latest October Xbox One update, these new avatars are now available to everyone.
If you chose to upgrade to the new avatar system, you will lose your old avatar and any items associated with them, but you will get access to a wide range of new items, clothing and emotes, many of which feature higher levels of detail and animation than before.
The new avatars include a lot of neat options previously not included, like prosthetic limbs and mobility aids, which allow them to represent a wider range of players more accurately. They will appear in an animated form on the home screen, activity feed posts, profiles, and a bunch of other places. You can currently chose to keep your old avatar, but it's unclear if this will be the case forever.