Was it up to the level of THE AVENGERS? No. Was it better (much better) than IRON MAN 2? By far and more. Let's go into some of the details with a few SPOILERS:
Robert Downey, Jr., Gwyneth Paltrow and Don Cheadle are all back in their roles, possibly for the last time. Tony is now having some anxiety issues stemming from his actions with the Avengers in New York. He tries to cover them with his usual smart-aleck and assured attitude, but Pepper knows that something is wrong. Meanwhile, a terrorist known only as The Mandarin has been attacking various American targets abroad and now in the U.S. When Stark announces his intention to hunt him down his own home is attacked and destroyed.
Unfortunately, Stark's latest version of the IM suit has not been completely tested and it is further damaged during an attempt to battle the Mandarin's forces. Without his equipment and miles from home he finds he has to improvise until he can return to action.
A lot of folks are upset by the change in The Mandarin, from the way he has always been portrayed in the comics. Not only does he not possess the rings of power that made him all but equal to Iron Man, but it turns out that he is a fake in more ways than one. I was surprised, as everyone was, by this turn of events, but Kingsley was so good (as both the Mandarin and his true identity) that I forgave the deception. The film-makers go for a political message about the public's need for a 'bad guy' to hate and the government's use of them for their own purposes.
I'm giving the film a 3.5 stars. Also, while not a huge moment I do recommend you stay through the credits. First off, the end credits are really nicely done with a sort of '70s feel to them. Then there is a moment were we see to whom Tony has been telling the story in flashback since the beginning. Funny bit with another Marvel character. The movie has my recommendation.