Gillean is right: MPEG-4, especially the H.264 codec, is amazing. If you want to see for yourself, get Quicktime 7 and go to www.apple.com/trailers . They have a few trailers in High-Def that you can watch (granted your computer is fast enough) and the quality is superb. The great thing is, the new Blu-Ray/HD-DVD fomats have to support it!
On the topic of using Lossless compression on the new disks coming out: I don't think that the bit-rate is fast enough on those drives. I think the peak data rate is 30Mbps on Blu-Ray/HD-DVD. Correct me if I'm wrong, but if this were true, there'd be no way you could play those films in a normal disk drive. You'd have to copy the files to your harddrive and watch them there.