Mk1 to Mk2: Most of the major changes occured here. Some internal boards upgraded, removal of the audible beep between tracks, and smoother function of the front panel buttons and top sliding door. Overall, the Mk2 is more musical, no question about it.
Mk2 to Mk3: New DAC board employing PCM-1704 chip instead of PCM-63 (the latter was no longer available). According to importer (Aaudio Imports) the Mk2 can be upgraded by owner. By the way, I have met Brian at AI, and Lector is now in good hands. (I have no affiliation with Lector or AI.) Can't get one? Blame Lector, not AI.
I have owned only Mk1 and Mk2. I cannot comment on whether Mk3 sounds substantially better, but Mk2 is quite nice. I have not pursued the new chip because I'm happy with the Mk2. Perhaps someday.... (You can get the new chips if you buy the separate DigiCode DAC.)
A final note for Mk1 owners: According to Lector all of these units should have arrived with Chelmer Valve 12AT7 tubes (which is a rebranded late-model Mullard tube). If you have EH tubes, then either the first importer or your dealer swapped them out. (The CVC are nice, but I suggest trying Mullard CV4024 in the Lector CDP-7T.)