What is the difference between F1 & F2 modules in Nexus 7000 Switch?

The F2 still provide all the built-in features of F1 line card. It actually take the operation further to provide better bandwidth. Currently, the F2 card will give wire-rate speed. This means that 48 port populated with 10G links will run in non-blocking architecture. Something new that was not possible in the older line cards, of course this all became possibility with the FAB-2 (fabric module 2)

One of the main advantages and upgrades it the ability to run in Layer 3. The Cisco Nexus 7000 48-Port 1 and 10 Gigabit Ethernet F2-Series Module will be able to delivers 720 million packets per second (mpps) of distributed Layer 2 and Layer 3 forwarding and up to 480 Gbps of data throughput.But the F2 cards lack the ability to run OTV or MPLS.

All in one, if doing a new purchase of Nexus 7k. Just buy the F2 cards. IF there is a need for OTV and MPLS then you would need to get the M1 card. Otherwise, F2 will suffice for all the data center networking needs.