Blu-ray, also known as Blu-ray Disc (BD) is the name of a next-generation optical disc format jointly developed by the Blu-ray Disc Association. The format was developed to enable recording, rewriting and playback of high-definition video (HD), as well as storing large amounts of data.
The difference between this disc and dvd (besides capacity) is that dvd a red laser to read data which wavelenght is 650nm, on the other side blu ray discs use blue-violet ray (there their name) which has a wavelenght of 405nm, allowing to focus the laser with greater precision and therefore packing the data more thightly and stored in less space.
Comparison with HD-DVD and DVD:
Will they be compatible with DVD?
Yes, several consumer electronics companies (including Panasonic, Philips, Pioneer, Samsung, Sharp, Sony and LG) have already made products that can read/write CDs, DVDs and Blu-ray discs using a BD/DVD/CD compatible optical head, so you don't have to worry about your existing DVD collection becoming obsolete.
So, as you can see, HD-DVD also relies on reading data with blue-violet ray, but the thing is they offer lower disc capacity than blu-ray.
Update*
In fact blu-ray blank discs will cost about $50 and the players will start with prices of about $1000 - $1800, the price is high but it will lower with time...(i hope )
That's really cool. Thanks. 
