Blu-Ray and HD-DVD are the two upcoming formats for higher density DVD (similar to DVD-RAM/DVD-ROM and VHS/Beta and so on). Industry players are lining up behind one or the other.
3, in your case, unless developers make full use of the space available (not always likely - plus even if you have 50GB for high-res textures, you don't have the processing power to use them) or you want to watch high-definition movies, it's not going to be that big a deal.
You can't really win in siding with one or the other. While both have some solid electronics pioneers (Philips, Samsung, Panasonic, Pioneer vs Toshiba, NEC, etc), they both also have the interest of DRM fiends (e.g., Microsoft) and big labels (Warner Bros, Universal, Paramount, Fox, Walt Disney, etc) who are all out to make your life (legal or illegal) hell.
Both will have DRM, both will be expensive initially and either could become the "next Beta" (e.g., a superior format that failed in the light of a more popular alternative).
Blu-Ray seems to have regained ground and could be the superior choice between the two, but in my opinion it's too early to be making bets either way.