It's is a completely new architecture it performs more execution per cycle so it does not need to have high frequency like 3.7GHZ Pentium EE to perform its job.
This one is easy ! It has to do with the pipeline and whats called IPC, IPC is instruction per clock its just a way of measureing in thoery how much work can be done. The pipeline part is where most of hte benifit comes. The P4 EE has a 20 stage pipeline in the CPU if an instruction or branch prediction is wronge then all 20 stages must be flushed and the work started over. The Core 2 Duo has a 14 stage pipeline I think (too lazy to look it up off hand but its less then the P4) To boil this all down to something simpler the Core 2 Duo is just plain more effiecient at getting stuff done (there is more to it then what I have said but those 2 points are the main difference that is in favor of the Core 2)
One last point to make people are over clocking the Core 2 Duo past 4 Ghz already so I dont think it will be tooo long before Intel cranks up the clocks