I can't really see why anyone would use their PC for BluRay or HD-DVD though when most monitors are a lot smaller than TVs.
It's about convergence, which is a major market that Intel, MS, etc. are trying to push. Why buy a $30 DVD player when you can do the same job with a $600 computer + $70 software DVD player? This is the argument against it I suppose.
The idea is what's called a media centre PC. I'm sure you've heard about it and know what it is, so I'm not going to tell you what you ought to know already. The idea is that a single box can be the source for all media types. You have TV/DVR, video library (including DVD and .avi playback), music library (including CD and .mp3 playback), and internet radio streaming. It's also not a bad place to keep your digital photo album. The living room is a logical place to show your pictures of that last vacation. The possibilities are endless, which is the whole point of using a PC as the source... oh yeah... and some computer games translate well to the living room, like a flight simulator, etc.
Anyway, the idea that people are using computer monitors for HTPCs is kind of silly. I've got a 32" LCD TV working for me, and I like the current setup.
I wouldn't naturally say that it makes sense for everyone to use a PC as a media centre. A lot of people are going to be served better using a regular, cheap DVD player and TV tuner. However, in university I didn't have a TV, so I used my desktop in my dorm room for movies. Later on, I moved into a house, and one of the guys owned a TV. I formed a habbit of using a laptop as the media source whenever I wasn't watching regular TV. Then I moved in with my GF and we were back to having either a 14" TV or a 19" computer monitor, so we ended up watching movies and TV on the computer. It turned out that the laptop was doing nothing other than media centre tasks, so when the time came to replace the laptop, instead of buying another one, I just built a media centre PC (and we picked up an LCD TV). It seems that I'm a natural fit for the HTPC market because I was using a computer for my entertainment 7 years ago. This was my natural usage pattern even before computer hardware was being made for the task. I'm sure there are a lot out there who will consider the media centre to be very convenient now that computers are being designed for it.
Of course, all that could fail if content delivery or playback is needlessly encumbered by the media industry. This would be unfortunate for everyone, since I'm more likely to buy content if it's convenient for me (more $$ for the studios) as well as think of all those people buying extra computer hardware and software to put in their living rooms (more $$ for that industry). On the consumer side, we do it because we choose to (more choice for us). The failure of this movement, which seems to be what the studios are pushing for, makes no sense to me.