Finally IE 8 renders the above image correctly. On my browser IE 7 it still sucks.
So what the fuss is all about? Acid2 is a web test (though not a standard) which tells how browsers renders some specific features of web standard. Web Standards Project, publisher of the test, is an Web Standard Advocacy group. For a web developer, supporting ACID 2 means a better cross browser compatibility. They don't have to write different set of style and HTML code for different browser. It certainly make their life happier.
IE was one of the worst performing browser as per the ACID test but not any more.
As per the Blog post from IE Blog
"With respect to standards and interoperability, our goal in developing Internet Explorer 8 is to support the right set of standards with excellent implementations and do so without breaking the existing web. This second goal refers to the lessons we learned during IE 7. IE7’s CSS improvements made IE more compliant with some standards and less compatible with some sites on the web as they were coded."
With earlier releases of IE, it used to break some of the the existing web sites. For example my blogger theme just didn't work with IE7. It was pretty much fucked up and I had to revert to some other theme. Hopefully I will not have to suffer any more.
Well DONE MSFT and IE team.