SQL Server 2005 has new optimization logic to use the SCHEMABINDING option to derive certain properties about the TSQL UDF. This can greatly improve performance of queries that use scalar UDFs in a SELECT statement for example. You can read all about it at the blog entry below from one of  our development engineers.

http://blogs.msdn.com/sqlprogrammability/archive/2006/05/12/596424.aspx