Coming from an IGN interview with Monolith Soft studio head Tetsuya Takahashi...
“It's a completely different world, with completely new characters. It's a different game (than the first). The way I see it, I feel as though Xenoblade 1 and 2 are connected and linked in the sense that they're linear and story-driven games, whereas Xenoblade Chronicles X was more focused on open world and exploration, and maybe an online aspect. I feel like I'd like to continue to create games separating those two aspects out.
Drivers are basically humans. Then there are these things called Core Crystals. Throughout the game, you'll collect many of them, and if a Driver touches that Core Crystal, a lifeform is created. That lifeform is what we call a Blade. The Blades endow the Driver that they're linked with power and a weapon. Each Blade has different roles that it can play, so the concept is that, by attaching different Blades, the player can decide what kind of role they want to play in the game.
At the very base level, conceptually, it hasn't changed. In previous iterations, you had to select the icon and then activate the Arts. It's just, this time, the depiction of the icons is directly related to how the buttons are laid out. So it's a lot more direct and intuitive.”