The novelization of Episode I: The Phantom Menace was written by Terry Brooks, best known for his Shannara fantasy series. While Brooks, for the most part, follows the script very closely, he also adds several new scenes which cast the story in a different light, making this novelization a very interesting read.
George Lucas has stated that the Star Wars saga, Episodes I through VI, is meant to be the story of Anakin Skywalker -- the rise and fall of a tragic hero. In the film version of The Phantom Menace, however, Anakin isn't the focus of the story. He shows up suddenly, partway through the story about Queen Amidala and her Jedi protectors; if we didn't already know he was supposed to be important, he'd feel more like a living MacGuffin than a character.
In the novelization, on the other hand, Brooks reframes the story, beginning not with the invasion of Naboo but with Anakin competing in a podrace. Because the novelization introduces both Anakin's character and the idea of podracing early on, they fit in the story better rather than feeling so sudden.
Expanding Anakin's Character
Brooks continues interweaving new scenes of Anakin with the opening scenes of the Jedi and Amidala until the characters meet on Tatooine. These scenes expand Anakin's character and take advantage of the novel form to do what the movie cannot. The novelization can handle a more leisurely pace than the movie, allowing Anakin's story to be introduced early and making it feel like an equal and parallel plot to the invasion of Naboo, not a B plot.
The novel also has more freedom to explore Anakin's character and its characterization is ultimately more expressive, since it need not rely on the limited expressions of a child actor. The minor additions and changes to the dialogue and Anakin's mannerisms establish his character as more creepy than in the movies: eerie in his wisdom while remaining childlike in his innocence. And though the additional material often overemphasizes the conception that Anakin is kind, gentle, and caring, one scene in particular -- in which Anakin cares for a wounded Tusken Raider -- has an even greater impact after seeing Anakin's slaughter of the Sandpeople in Attack of the Clones.
Dialogue and Descriptions
The rest of the novelization is competent, although it doesn't add as much to the story. The dialogue is almost exactly the same as the movie, with a few minor additions, and the characterization is spot-on. One exception is Jar-Jar: like Yoda's speech patterns in Episode V, the Gungan dialect changed considerably from page to screen. It is easier to ignore Jar Jar in the novel, however, which is a plus; there are even a few scenes where Brooks seems embarrassed about Jar-Jar being there.
The novelization's weak point, though, is Brooks' description of action scenes. Qui-Gon's fight with Darth Maul on Tatooine works okay because Brooks glosses over the action just a little, writing the scene from the perspective of the people inside the ship. This tactic doesn't work for the action scenes at the story's climax, which weakens the end of the novelization considerably.
Terry Brooks' The Phantom Menace is a good adaptation, faithful to the original film while building upon and improving the story and characters. There are a few weak points -- the action scenes, a few short descriptions, and some backstory that doesn't jibe with existing canon -- but altogether, the book is a good novelization and a decent novel. Even if you're not interested in reading the entire novel, I recommend reading the first few chapters just for the additional scenes about Anakin.