Blu-ray disc. The lack of demand hasn't stopped Sony and Panasonic, though. The two companies have developed a new technology called "i-MLSE" that can increase the capacity of a single-layer disc by about a third, to 33.4 GB. According to Nikkei Electronics, i-MLSE is a processor-intensive method that will allow players to properly calculate the read-error rate, a stumbling block that prevented larger capacity discs.
Presumably, it will only take a firmware update to ensure Blu-ray players (like the PS3) can utilize the new disc format. Sony plans on encouraging widespread adoption through the Blu-ray Disc Association, which shouldn't be a problem considering Sony plays a pretty large role in that organization.