im a cinema projectionist. it is still industry standard to use reels of film and this will continue for many many years to come.
however digital cinemas are on the increase using DLP projectors. however films will not be on standard DVD's due to the copyright element. they will be special disks which cannot be played on any standard DVD players and will have a time limit on the use and passwords which will expire. this is due to the threat of people watching new releases outside of the cinema illegally.
They still use reels of film...DVD as it is now is far from suitable, the resolution is too low for a start! It would look all grainy and rubbish. The new wave of high capacity DVD's (blue ray & HDDVD) show a possible step in that direction but it's unlikely even they will be good enough.
We've just had a state of the art, 11 screen cinema built in our town recently and when I saw the Da Vinci Code it went wrong and you could see the film cells and hear the sound slowly speed up as the reel restarted!
Hey spike...I was watchin a film a while back and it was slightly out of focus. Not enough for most people to notice but it made my eyes feel terribly strange! Is that a fault on the film or the fault of the projectionist?