Sorry for the newb question...
 

... but I have heard our cars described as 986.1 or 986.2. Anyone care to enlighten me? Thanks in advance!

The 986.1 would be the 1997-2002 years, and the 986.2 the 2003-2004 years.

Thank you, sir!

There are really three generations of 986;

986.1 - 2.5L cars, 1997-1999
986.2 - 2.7L base and the 3.2L S, 2000-2002
986.3 - Same engines as Gen 2 with glass window, glove box, etc, 2003-2004

But I agree with Deserion that most commonly the break is 1997-2002 and 2003-2004.

I think the change in the headlight and tailight (from amber to clear) is also part of the facelift to 986.2, correct?

Can't help with the .1, .2, .3 designations, but the 03, and 04 have a different engine than earlier models in that the variocam is hydraulic like the 987 instead of electric like the earlier models.