I believe there are players on the market at the moment that can play DVD, Blu-Ray and HD-DVD, (all of which use different lasers, which is why such integration is hard to do and thus it will be more expensive), so your old DVD's won't be obsolete, but as Thrik said, in a few years, distributors will stop making them (much like many media shops such as HMV, Virgin or the media shop of your choice in your area who no longer sell VHS) and shops will stop selling them so you'll be forced to upgrade.
The nice thing about BluRay is that 30Gb's is the standard size, but with dual layer, as well as double sided discs, I think it's been theorized to be able to reach something like 80GB's or more. HD-DVD can do similar, but not quite as high capacity, but then the Discs and Players (and recorders) will be cheaper.
This links in to what Thrik said about high-def. Basically, even with the current capacity of a standard DVD, the movie needs a basic form of compression (and a very decent CPU). But with a higher capacity on the disc, you have more room to have higher resolution picture (and with 30 frames a second, that will take up a lot of room for a decent 2 hour movie) and much better clearer sound, with the possibility of extra channels if you were so inclined to have any more than 7 speakers in your room, (what better reason to never visit the cinema again when movie execs are in talks about Movies coming out in the cinema and on DVD/Blu-ray/HD-DVD simultaneously)
Even still, at the moment, they're way too expensive for most people to be thinking about on a large scale, only very well off mediaphiles will be interested (or someone who's stupid with money, one might argue there's no difference, I can certainly see a venn diagram emerging), but likely, in a few years the price will plummet as it did with the DVD player, the first one I ever bought being around £160 (mind you, it was a pretty decent player, but a player it was only) and the latest one I've bought running in around £30 (and that was over two years ago). HD-DVD players and Blu-Ray players will be sure to follow suite.