BluRay (NOTE: It is actually BluRay, not BlueRay) is better quality but you'll only really see a difference if you have a big TV and you only need that if you are sitting a certain distance from the TV otherwsie a regular quality DVD player is fine IMO
Why I don't think BluRay will take over like DVD did is that it is only an incremental improvement and there is just so much invested in DVD now in a way that didn't exist for VHS. The change from VHS to Disc was huge and now people have DVD players in cars, bedrooms, portable players and so on and only a small percentage of people will replace those.
Some of the pushing of the HQ formats is of course to make piracy harder - DVD films were getting to the stage where they were easy enough to download but BluRay pushes that back to the stage that only die-hards will do it.
Still, I have a BluRay player and for certain movies it's nice to watch. Transformers looks absolutely brilliant on it.