I recently downloaded version 7 and registered it. What I want to know is how much different is this version from the last one I used...The last one being version 5.0 ( I have been out of this hobby for awhile now). I hope to bring my rusty skills from long ago back to fresh air and produce some really good stuff like I used to.

There are way too many changes to just post in a reply. You can find all you need to know at YoYo Wiki.
http://wiki.yoyogames.com/index.php/Game_Maker_7.0
http://wiki.yoyogames.com/index.php/Game_Maker_6.1

DirectX 3D accelerated graphics. That's all you need to know.
You can have multiple sprites with alpha values while keeping a positive frame rate.
"surfaces" allow for snazzy graphical effects like blurring and bloom lighting.
Primitive 3D support.
Blending modes for sprites allowing for "glowing" sprites, replacing the full-screen gamma effects.

Of course there are hundreds of other improvements and new features but who cares when you have eye-candy?

A large chunk of GM5 coding will not work/has a different function.
image_index
image_single
Font/changing set colour values like
brush_size
brush_color
Drawing functions
draw_pixel

And many more, those are scripts alone. Extensions is a great addition to GM7, also the most noticeable is DX8 rendered. Rather then the older Direct Draw. Also it requires a higher spec video card GM6 & 7. <=8 mb video cards are likely not able to open the game. 16 will struggle with very little resources and refuse to work. Also GM7 does not work on windows 98 and gamemaker 6 does not crash in sprite editor in windows 98.

The sprite selection tool rocks.

New window features in game options, can't remember exactly which ones.

There is just so many improvements/additions to list.

Oh and GM's built in 3D functions.

In the words of Daft Punk, GM is "Harder, Better, Faster, Stronger", except for the harder part - it's not any more complicated really.

Oh, and instead of using .GMx (x=the game maker version - example: .GM6), they are using .GMK for Game Maker files.

Before GM6, it was GMD (as in Game Maker Document), so the OP probably knows nothing of GM6's. It was changed to GM6 because of the drastic changes between the two versions, not least of which being the changes in GML that left GM6 unable to run GMDs most of the time. It was changed again in 7 presumably because it makes no sense to have GM7 documents called GM6's. They chose GMK instead of GM7 because of what I assume to be wanting to keep the same file extension for future versions.

Well...The difference between 7 and 5 is surfaces, for starters, 3D mode, a ton more functions, and other stuff too.

IMO GM7 is just a bit different and almost Vista/W7 ready...
It can provide you some more features for even more resources.

On the other hand it must be really difficult to invent the new version from scratch.
So, atm my only hope is a real cross-platform compiler instead of linker (loader).

Cheers

P.S. Why don't you try the manual and gmK examples?

Actually the source of GMK is believed to have come from the fact that GMKs are enc(k)rypted, as opposed to GM6s. While that seems like the most likely situation, only Mark knows the decisions behind the file extension naming.

You reminded me, GMKS are larger files, larger exes and I have yet to find a commercial exe protector which works with GM7. "Not made specifically for GM"

Where did you hear that?

In my statement I was referring to "not *.GM7" rather than "*.GMK" specifically, but up until this point I just assumed the K came from Game MaKer.

Larger GMKs: There was a load (and I mean a load) of junk data (random 16-bit int followed by 0000) put in the GMK just to throw off anyone trying to decode it.
Larger EXEs: More functionality in the new version of Game Maker - it's all included in the EXE.

Not to mention the uncompressed runner to make it Vista friendly (which doubled the size of the runner)...

GM5 is faster when using Ultimate 3D. Thought I'd throw that in there.