In Canon lingo, "L" technically stands for Luxury, meaning no expense has been spared in the design and manufacture of those lenses. L-series lenses are also all full-frame lenses meant for use on both Canon's digital and 35mm SLRs. By contrast, the EF-S 17-85mm lens you mentioned can only be used an EF-S compatible Canon DSLR (eg. Rebel XS/XSi/T1i, EOS 50D, EOS 7D) and is not built to the same structural or environmental standards as a typical L-series lens. For example, most L-series lenses have rubber seals that make them dust and weather proof when mated to weathersealed cameras like the 7D, 5D or 1D.

Is the image quality better in an L series lens than a non-L series of similar focal lengths? It almost always is but, how much better is subjective and not often something the average person can see when making normal size prints (4x6 inch, 5x7 inch, etc) or with images sized for email or the Web. That said the differences in image quality become much more apparent when you start making prints larger than 5x7 (eg. 8x10, 11x17, 24x36, etc) or viewing images at 100% magnification. And even then, the difference is something you may only be able to see in the corners and edges of the frame. As the owner of several L and non-L lenses, including the two you've mentioned, I strongly suggest you compare images yourself before investing in an L-Series lens.

I have both lenses and prefer the 17-40mm because it has less distortion and is sharper across the frame than the 17-85mm lens. The downside is the 17-40mm lens lacks IS which would be nice in low-light. The 17-85mm lens also has more "reach" or a wider zoom range that makes it a little better as a general purpose lens.

The following reviews might be useful to you:
17-40mm f/4L USM

http://www.cameralabs.com/reviews/Canon1740mmL_400D/index.shtml

http://www.the-digital-picture.com/Reviews/Canon-EF-17-40mm-f-4.0-L-USM-Lens-Review.aspx

17-85mm f/4-5.6 IS USM

http://www.cameralabs.com/reviews/Canon1785EFS/

http://www.the-digital-picture.com/Reviews/Canon-EF-S-17-85mm-f-4-5.6-IS-USM-Lens-Review.aspx