Difference sets have been studied for more than 80 years. Techniques from algebraic number theory, group theory, finite geometry, and digital communications engineering have been used to establish constructive and nonexistence results. We provide a new theoretical approach which dramatically expands the class of $2$-groups known to contain a difference set, by refining the concept of covering extended building sets introduced by Davis and Jedwab in 1997. We then describe how product constructions and other methods can be used to construct difference sets in some of the remaining $2$-groups. We announce the completion of ten years of collaborative work to determine precisely which of the 56,092 nonisomorphic groups of order 256 contain a difference set. All groups of order 256 not excluded by the two classical nonexistence criteria are found to contain a difference set, in agreement with previous findings for groups of order 4, 16, and 64. We provide suggestions for how the existence question for difference sets in $2$-groups of all orders might be resolved.