You've probably heard about Blu-ray - and possibly of a competing format known as HD-DVD that died a couple of years back - as that new disc that can deliver high definition movies in the same sized medium as a DVD (or CD, for that matter). What's different about Blu-ray is its capacity, storing at least five times as much data as a DVD can hold - and squishing so much more digital information in the same amount of real estate is an impressive and somewhat-mysterious feat.
An average length movie with a standard definition resolution of 420p, encoded using MPEG-2 (the standard DVD compression format), is about 4 Gigabytes (GB) in size, which just barely fits on a single-layer DVD. The same movie stored at the much higher resolution of 1080p and encoded using the same compression format would require far more space -- about 25GB. Put another way, you'd need least six standard DVDs to hold a high definition movie (which a standard DVD player wouldn't necessarily be able to play, mind you), or three dual layer DVDs.
Alternatively, you could just use one Blu-ray Disc.
Blu-ray trumps standard DVDs by using a more efficient method of data compression, called MPEG-4, a set of encoding technologies that basically shrink content - including video, audio, interactive features, and subtitles - so it will all fit on a disc like so many binary sardines and reliant on the MPEG-4
decoder to pull the data back out and make sense of it all, or make it a movie, as it were.
The second - and perhaps more impressive - means by which next generation DVD technologies expand data capacity without increasing the physical size of the disc is to make the data, the binary sardines, smaller.
Optical discs, including CDs, DVDs, and Blu-ray Discs, store data in long spirals composed of millions of microscopic bumps. To retrieve data, a media player focuses a narrow laser on these bumps as the disc spins. A sensor collects the light reflected off each bump, and a digital signal is created, composed of the information contained within this light.

The amount of data, or bumps, stored on a disc depends on several factors, most notably the wavelength of the laser that will be used to access it. The smaller the wavelength, the smaller you can make the minimum distance between spiraling lines of bumps without compromising readability.
Think of it as a document. The more you reduce the size of the typeface and the space between lines of text, the more words you can put on a single page. Of course, the smaller the words get the more difficult they are to read.
Optical disc technologies experienced the same obstacle. DVD players employ red lasers with a 650 nanometer wavelength capable of reading bumps of data 0.4 microns in size on spiral tracks 0.74 microns in width. If you want to store more data in the same area, you have to make it smaller, but if the bumps were made any smaller or placed more closely together, a red laser wouldn't be able to read them, because it would inadvertently read many of the neighboring bumps at the same time, which would be gibberish, a cacophony of screaming sardines. The failed laser-disc movie format used huge, 12 inch discs to overcome the problem, but the platform was cumbersome and never really took off.
However, Blu-ray players don't use red lasers, but rather blue ones (hence, the name, albeit misspelled) that have an even smaller wavelength of 405 nanometers, which, in turn, allows bumps of data to be decreased in size to about 0.15 microns and spiral track widths reduced to 0.32 microns.

As a result, you can fit a heck of a lot more stuff onto a single disc - and read it, too. The table below shows just how much more information HD-DVD and Blu-ray formats can store compared to DVD. (Note: dual layer discs have two spirals of data, one overlapping the other, that can be distinguished by a player's laser/sensor mechanism.)
Now, for all its data-packing mojo, there are a couple of trade-offs that come along with the bigger binary sardine suitcase.
The first is cost. Blu-ray strays from the DVD standard of sandwiching data spirals between two layers of plastic. Instead, the data layers of a Blu-ray disc are positioned atop a single layer of plastic and covered with a thin, hard laminate to prevent scratches. Not only does this method allow the laser to read smaller bits of data packed more closely together (hence the greater storage capacity), it also makes for cleaner reading and less chance of laser distortion.
Sounds great, but this new methodology means that Blu-ray discs require entirely new manufacturing facilities. HD-DVD, when it was looking to become the next big thing instead of Blu-ray, was close enough in format that it can make use of existing DVD manufacturing plants with only minor changes in equipment calibration. Yes, cheaper... a tragic tale of two formats where the winner wasn't necessarily better. So long HD-DVD, we hardly knew ya.
The second disadvantage of Blu-ray is compatibility. Again, HD-DVD used the same basic format as DVD, all of your old DVDs could be played in an HD-DVD player. But with the Blu-ray and standard DVD format disparity, Blu-ray player manufactures are forced to include "backward compatibility" technology of normal DVD playback as a separate function, making each a "2 in 1" disc player instead of a single player that is innately compatible with both the new and the old format.
It's part of what Blu-ray players so expensive. that plus the entire new whiz-bang sarding packing made Blu-ray a really expensive purchase decision.
On the upside, there is no more format war, Blu-ray is the only high def medium you have to choose, prices have dropped to reasonable levels and Blu-ray players are evolving with the times and now boast a wealth of internet-connected features, including social networking, streaming media and real-time updates.
Oh, and they play Blu-ray movies.