While Niantic Labs did indeed push out an update to Pokemon GO yesterday, bringing the popular game to version 1.3, Nearby did not make its anticipated return. Although it did return for a few users in San Francisco. It appears that Niantic is testing out a new version of Nearby, which will show you where Pokemon are, nearby. Now, the Pokemon are shown with a picture of their nearest Pokestop. So if you are in an area where there are loads of Pokestops, you should be able to pinpoint where that Pokemon is. Especially helpful if you're looking for one more Horsea so you can evolve it.
The Nearby feature covers a bit more distance than the previous version did. It appears that it will cover up to 500 meters from where you currently are. It appears in the section with the "Sightings" which are Pokemon that have been sighted in your area. The feature may appear for everyone in the next major update to Pokemon GO, as long as everything is goes well during this beta testing stage.
When Niantic Labs removed the Nearby feature in the last update, many users were upset. Especially after Niantic shut down a number of third-party websites that helped users figure out where Pokestops are, as well as where Pokemon are and how long they'll be there. Services like PokeAdvisor, Pokevision and many others were shut down, thanks to Niantic refusing their access to their servers. While this new Nearby feature definitely won't fix the issue, and incorporate all the features of these third-party services, it should at least make players a bit more happy.
If you haven't already picked up the latest version of Pokemon GO, you can do so from the Google Play Store. There are a few subtle changes in the update. Of course, Sightings is one of them. Another is the ability to change your trainer's name. Before this, you were stuck with whatever name you chose when you first started playing Pokemon GO. So it's nice to see that Niantic has made it possible for users to change this later on down the road.