Editors chose her from among the 100 celebs who made it. The issue hits newsstands Friday.
People Senior Editor Galina Espinoza gave Russ Mitchell and Early Show viewers a sneak peek at the list Wednesday.
It ranged from Halle Berry, who made it for the 12th time, a record, to Miley Cyrus, 15, in the news the last few days in a less favorable light.
Hudson displaces Drew Barrymore, last year's cover subject.
Espinoza says Hudson "just embodies such an incredible natural beauty that is in vogue right now. We've gotten so accustomed to celebrities getting breast implants and nose jobs, and she will talk about being flat-chested and having a little bit of an offbeat look."
Espinoza added that Hudson embraces everything about her body, and that's one of the main things People staffers love about her.
The selection process for the list is fairly easy, Espinoza notes: Throughout the year, editors see pictures of the celebs every day, so they they're very familiar with the people they consider including.
Hudson is dating Owen Wilson again, Espinoza observes, and she has a movie with Anne Hathaway coming out. Hudson is a good mother and has a great relationship with her ex-husband.
"She seems comfortable with herself," Espinoza points out. "We have loved seeing her grow and evolve. She came on the scene as Goldie Hawn's daughter, then she became a mother. She has emerged as this strong, independent woman who revels in all of the roles that she has both personally and professionally."
Among others on the list:
HALL OF FAME: These all-stars have made our list so many times, they needed a list all to themselves:
Halle Berry Age: 41, Appearances: 12
Nicole Kidman Age: 40, Appearances: 9
Jennifer Lopez Age: 38, Appearances: 8
George Clooney Age: 47, Appearances: 8
Brad Pitt Age: 44, Appearances: 8
Angelina Jolie Age: 32, Appearances: 6
Matthew McConaughey Age: 38, Appearances: 5
Johnny Depp Age: 44, Appearances: 5
Jessica Simpson Age: 27, Appearances: 5
Alicia Keys Age: 28, Appearances: 5
Beyonce Age: 26, Appearances: 5
Berry leads the repeaters pack with 12 appearances, followed by George Clooney, Brad Pitt, Jennifer Lopez, Beyonce, and Angelina Jolie and Nicole Kidman.
When asked why they have made the list so many times, Espinoza responded, "These are the people who have really emerged as true style icons. They are not flashes in the pan."
She says these people have enduring careers and, as a result, have to change their look periodically. For instance, Jennifer Lopez is good at reinventing herself. Currently, she's a beautiful new mom. That said, not all celebrities have to change their look. George Clooney doesn't change that much. Espinoza says he just gets better with age!
About Berry, Espinoza remarks, "There is no question that she is one of the most beautiful women in the world, and we are seeing her evolve before our eyes. She is also a new mother. We saw her just this past weekend. You can't help but think, 'Wow!' She doesn't even look like she just had a baby. ... You can't help but think, 'How does she do it? ' "
THE NEW CLASSICS: The fab faces of 2008 put a twist on tradition:
Joy Bryant Age: 32, 'Choosing Beauty Over Brains'
Norah Jones Age: 29, The Crossover
Miley Cyrus Age: 15, The Phenom
Mary J. Blige Age: 37, The No-Drama Queen
Josh Groban Age: 27, The Crooner
Carrie Underwood Age: 25, The Country Sweetheart
Kate Beckinsale Age: 34, The Brit Import
Ashton Kutcher Age: 30, The Practical Joker
Sarah Silverman Age: 37, The Funny Honey
Christina Applegate Age: 36, The Comeback Kid
HEATING UP: These are the faces to watch -- the new talents, the rising stars and the next generation of Hollywood beauty:
Rumer Willis Age: 19, The It Girl
Sarah Larson Age: 29, The Newbie
Amanda Beard Age: 26, The Olympian
Anna Friel Age: 31, The Cult Favorite
Jason Taylor Age: 33, The Dancing Defensive End
THE CAST OF THE GOSSIP GIRLS: The Cool Kids
Why is People so fascinated with them? "Because," replies Espinoza, "the public is always fascinated by young, sexy stars, and it's a young sexy cast. It's a good, old-fashioned teen soap, which we have seen a lot in the last few decades, for example, '90210' and 'The O.C.' The cast members are all beautiful and make good 'eye-candy.' "
AGE-DEFYING BEAUTIES: 30 is the new 18! The women on these pages look at least a decade younger than they really are:
Angie Harmon Age: 35
Carrie Ann Inaba Age: 40
Iman Age: 52
Racquel Welch Age: 67
MORE THAN SKIN DEEP: Doing good, and looking good: These stunners shine from within:
David Beckham Children's Rights
Jennifer Garner Education
Queen Latifah Scholarships
Rihanna Children's Welfare
Salma Hayek Healthy Mothers & Infants
Patrick Dempsey Cancer Support
MY BEAUTIFUL COSTAR: Exclusive! What makes these leading ladies so appealing? Their TV colleagues explain in three original essays:
Tina Fey By: Alec Baldwin
Vanessa Williams By: Michael Urie
Mariska Hargitay By: Chris Meloni
YEAR OF THE REDHEADS: Occurring naturally in less than five percent of the population, red hair is on fire in Hollywood:
Marcia Cross Age: 46, Natural Redhead
Isla Fisher Age: 32, Natural Fiery Redhead
Amy Adams Age: 33, Enhanced Strawberry Blonde
Christina Hendricks Age: 33, Former Natural Blonde
Julianne Moore Age: 47, Natural Redhead
Lauren Ambrose Age: 30, Natural Redhead
WAKING UP TO REALITY: We asked the stars of MTV's The Hills to take pictures of themselves straight out of bed, fist thing in the morning:
ALL-CONSUMING BEAUTY: Three TV foodies share their scrumptious secrets:
Rachel Ray Age: 39, Red Wine and Taleggio Cheese
Ingrid Hoffman Age: 43, Mangos and Avocadoes
Sandra Lee Age: 41, Champagne and Bon Bons
NECKS APPEAL: A little ink -- pretty or political -- draws the eye to these great napes:
FACES BEHIND THE SONGS: See the real Delilah and more. Nine muses immortalized in lyrics:
Caroline Kennedy Song: "Sweet Caroline" Artist: Neil Diamond
Pattie Boyd Song: "Layla" Artist: Eric Clapton
Lisa Bonet Song: "It Ain't Over" Artist: Lenny Kravitz
Vanessa Marcil Song: "The Most Beautiful" Artist: Prince
Marisol Thomas Song: "Smooth" Artist: Rob Thomas
Delilah Song: "Hey There Delilah" Artist: Plain White T's
Kim Porter Song: "Last Night" Artist: Diddy
Paula Patoon Song: "Lost Without You" Artist: Robin Thicke
Guy Ritchie Song: "Miles Away" Artist: Madonna
CHATTER: Stars tell us about their beauty blunders:
Sarah Jessica Parker