Think of the director as the CIO. The two of you should be working very closely together.
He (hopefully) has the business savvy and (again hopefully) enough technical knowledge to understand how to make the present technology help the company meet it's business goals and how emerging technology might help the company become more competitive and profitable. He should also act both as a filter between upper management (who tend to be very non-technical) and the guys in the trenches (who you lead) to (hopefully) prevent totally unrealistic demands and expectations on the IT department and as a translator to put very techical issues in terms that the non-technical upper management can understand.
Your job will be to actually implement the strategies to get the maximum use of the available technology and keep it available to help the company meet its business goals.
I don't think you are experiencing anything new. The company obviously values you for your technical skills (orthey would have found someone that could fill both positions). They just realize that (as you said) you don't have the business background to necessarily make the correct business-driven decisions about the use of technology.
Your best bet wouldbe to have some long discussions with the new director to discover where both of your strengths and weaknesses lie. Then you both can arrive at a better understanding of how to use each other to your (and your company's) mutual benefit. As it sounds like you probably understand your role pretty clearly (your job description probably hasn't changed much), you might suggest the the director research the functions and responsibilities of a CIO as this is what it sound like the management intendsfor him to be (with or without that actual title.
Good luck.
