Since phpBB 2 pagination has been rendered mostly within the source. This limits just what designers can do with pagination. The current form is also questionable in terms of "best practice". The aim is to move rendering completely to the template via the use of a block element. Enabling S_ template vars also allows for control over specific aspects of the pagination output such as next, previous, active and ellipsis.
Related to this - merging the capabilities of the topic_generate_pagination with generate_pagination removes an element of duplication.
Templates can utilise the new functionality as such:
Embedding pagination blocks within other blocks is done in a similar way, extending the block names in the variables as required.