This will take a while like it did with VHS vs DVD. But the Blu-Ray market is expected to triple this year compared to 2007. The DVD market is expected to decline faster than it did in 2007.
At least the transition from DVD to Blu-Ray will be easier on consumers than it was from VHS to DVD, the Blu-Ray players do everything a good upscaling DVD would do as well.
I disliked it you couldn't record TV with ordinary DVD players like you could with VCRs, hope the PS3 becomes a good DVR.