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"Without Blu-Ray, your HDTV is just a TV."
Blu-ray is a relatively new optical media format introduced by the Blu-ray Disc Association, an industry consortium which includes Sony, Philips, Apple, Panasonic and many others. It is now the standard format by default for high-definition digital media. The discs are the same physical size as a DVD, but have a capacity of 25 gigabytes per layer (discs are currently at one or two layers), large enough for a feature-length film stored at 1080p resolution with significant leftover space. The Blu-ray format is used by the PlayStation 3; in fact, for a time this game console was the only Blu-ray player on the market, a factor that helped overcome some of the objections to its high price point.
All that space comes with a drawback. The read and seek speeds of the new disc are only marginally faster, while the capacity is much higher, leading to long load times for games released on this format. The problem is not as noticeable during movies, which are of course strictly linear. But it becomes even more noticeable when burning, although those wishing to back up hard drives would need a lot of time anyway.
The players are expensive, especially given how cheap DVD players have gotten, so most people have only one, if they have any. But they have recently been going down in price. There are few portable devices that support it. One solution to this problem is to copy the tactic from HD-DVD: package a DVD version of any given movie with the Blu-ray disc, so parents don't need to either buy the film twice, or try to explain disc formats to a six year old who's upset he can't watch Up in the minivan. Blu-rays were expected to replace DVDs as the standard home video format, but takeover isn't really panning out. An HDTV is needed to enjoy the sharp picture (it doesn't look different from a DVD on lower-resolution sets), but the sale of those has been slower than expected, as many people are unwilling to spend upwards of a thousand dollars to replace their functioning CRT TVs just for a prettier picture. It doesn't help that many people also feel that Blu-rays are not a significant upgrade from DVDs, as much as optical discs were an upgrade from cassettes (many DVDs hold up remarkably well when "upconverted" to high-definition -- most Blu-ray players should be able to play a standard DVD and in turn "upgrade" the picture quality -- but this can be subjective). Another problem is the people that buy HD-TV's and don't realize what to get with it.
In addition, the rise in popularity of online video sales and video streaming websites such as Hulu has also curtailed some of Blu-ray's growth. In response to this Blu-ray players have at least some internet television capability and can access content providers like YouTube, Netflix, Hulu, Blip, Crackle and others without a dedicated piece of equipment like a Roku Player or Apple TV. However, Blu-ray discs themselves still hover around the $15-$25 range (as opposed to $8-$15 for DVDs), which is often a turn-off for those who plan on switching to the new format. Some film company are responding by putting the bulk of the extra features on the Blu-ray versions, even basic ones like Audio Commentary.
The format's name comes from the blue-colored laser used to read the disc. A blue laser has a shorter wavelength than the red ones used for DVD players (and infrared for CDs), and thus can pick out the much smaller physical data tracks on the disc, allowing one to pack more data on a given area.
Ironically, Sony is currently up against LG in a patent war regarding Blu-ray technology, starting when LG tried to get the PlayStation 3 banned outside of Japan. This dispute could be part of LG's Xanatos Gambit to hold an illegal monopoly on the Blu-ray industry, as evidenced by LG dodging a Blu-ray licensing consortium just because it still wants to litigate.
Currently, a variant of the format, The Blu-Ray hybrid (Movie and a Game in one disk) has just started being available to the public, but as of this writing, only 5 (Macross Frontier ~The Last Songstress~ being the 1st, the hybrid versions of Top Gun and Days Of Thunder, the PlayStation 3 version of the Phineas and Ferb The Movie: Across the 2nd Dimension video game having 4 bonus P&F episodes on the same Blu-Ray (accesible on the XMB instead of the game menu) and the upcoming Macross Frontier ~The Wings Of Goodbye~) exist and are available in both the west and the east.
Unlike DVD where there were only two movies on launch day for the format, Blu-ray launched with seven films  that can all lay claim to being the "first Blu-ray title.