Sorry, that headline isn't entirely accurate. A few groups of people care: Sony, Toshiba, and geeks. But most consumers don't know what Blu-Ray and HD-DVD are, wouldn't care if we told them, and would be extremely confused by them if we forced them to care.
Here's a summary, for those of you who are normal and haven't heard about these formats: DVDs have great picture quality, but the resolution of DVD video is less than the resolution of HDTVs. Blu-Ray and HD-DVD are two new types of discs that solve this problem: they look and work like DVDs, but have HD-quality video.
Most major DVD-player manufacturers and DVD-movie studios originally supported the HD-DVD standard, mainly championed by Toshiba and Samsung. It's cheap to produce and simple to play. It can also fit a regular DVD and an HD-DVD layer into the same disc, so people don't have to buy two copies of a movie if they need both formats.
Then Sony got involved. As they tend to do, Sony decided that they would create their own proprietary format instead of simply adopting the one everyone else agreed on. Sometimes this works out well - Sony has been partially or completely responsible for many successful standards, including the CD (with Philips) and the 3.5" floppy disk. But nobody likes when Sony tries to force their formats into an already crowded space. Sony ignored this and created Blu-Ray. It holds more data than HD-DVD, but is more expensive and complex, and can't offer combination-DVD discs. And they confusingly call the rewritable discs "BD-RE" instead of "BD-RW".
Now, we're entering a format war. Consumers hate format wars. Everyone remembers their friend who bought a huge Betamax library and, after having the Betamax player die and not being able to buy another one, was forced to switch to Laserdiscs. More recently, in the geek world, we had DVD-R and DVD+R.
Nobody wants to invest in equipment and media for the format that eventually loses, so the mass market just sits back and waits until there's a clear "winner", then buys that one. Or they'll buy one without realizing that there's a format war, then angrily tell all of their friends when their chosen format loses and they can't buy its media anymore.
Unless there's a clear loser from the beginning, like Sony's UMD or the Sega Saturn, format wars dramatically slow adoption of new technologies. They can only be resolved when consumers are highly motivated to adopt the new technology, such as the DVD-R vs. DVD+R battle.
If the motivation for adoption is already low, a format war will eliminate any chances of either format's widespread adoption. That's one of the many reasons why you've probably never heard of SACD (by Sony) or DVD-Audio (by everyone else). In case you're not one of the 12 people who have read my site since 2004, here's a summary of why SACD and DVD-Audio both lost, and didn't stand a chance of success even in the absence of a format war:
I don't think the heads of Sony and Toshiba read my article.
Cassettes were quickly replaced by CDs primarily because people hated rewinding. CDs were also lighter, cooler-looking, and better-sounding, and enabled many more playback options such as random mode and many-disc players. Being better-sounding alone wouldn't have been enough, even though it was a big jump in sound quality that was obvious even on low-end equipment.
We transitioned from VHS tapes to DVDs more quickly than any other format change in history because people still hated rewinding, especially after being spoiled by CDs. Menus were also cool because they gave a pretty interface to a major underlying feature change (secondary video and audio streams) that let publishers include commentary, alternate languages, subtitles, and extra scenes. And people could play the same discs in their computers, which laptop users greatly appreciate on long flights or in boring hotel rooms. Video quality also improved dramatically enough to be obvious on almost any TV.
See a pattern?
In both transitions, most people even gave up cheap, easy recordability and repurchased their entire media libraries. People are willing to give up features when the advantages are compelling enough.
But with Blu-Ray or HD-DVD, the disadvantages are far greater than the advantages. You need to buy an expensive player, repurchase your movies, and give up cheap recording, computer playback, car playback, portable playback, and most of your Fair Use abilities. Oh yeah, and then there's this format war with no clear winner in sight. Sony even prohibits dual-format players in the Blu-Ray license, so unless they magically change their minds to boost their competitor, you can never buy a player that works with both formats.
For all of those disadvantages, you gain... HD resolution. That's it.
And HD video has its own problems. Most people still don't have HDTVs. HDTV programming and coverage is still incomplete and immature. And the technology is very confusing, even to geeks: 480p, 720p, 1080i, 1080p, composite, component, DVI, HDMI, HDCP, WTF, QAM, OTA, ATSC...
Given how complex it is, I bet most HDTVs have never displayed an HD signal.
But the owners don't care. Regular TV signals still look good on HDTVs, and even cheap DVD players can make regular DVDs look great in 480p. And most people don't care about the resolution of their video signals in the first place - they just want big TVs.
The format war is irrelevant. Nobody really wants either of them.
I do predict a winner, though. The (eventually) upcoming Playstation 3 will use Blu-Ray, which will cause a bunch of people to accidentally buy a Blu-Ray player. They might accidentally buy a Blu-Ray movie at some point, and the PS3 might be connected properly to a TV that might be an HDTV. If it's really playing through a composite input at 480i, the owner won't notice.
But this is at least more likely than someone buying an HD-DVD player.
Blu-Ray will win the format war, but most people will still be buying DVDs. They're not going to stop being made - everything's still released on CD even though SACDs have been around for 7 years.
Congratulations in advance, Sony. Your format finally won against significant competition. Too bad it doesn't really matter.