Unfortunately, it seems inevitable. I would think CD's and DVD's will still be available, though, for a good many years. A substantial share of music listeners and movie viewers are not going to be willing to learn a new trick (downloading), and until the quality of downloaded music improves, there will be a market for better quality software on CD and DVD.
How many people have a fast connection at home right now? I doubt a high percentage of people will have it in the future unless prices fall even further. 5 years from now there will probably HD-DVD and you can't tell me they're going to try to pipe HD when they're having trouble now. But who knows, 5 years is a long time and something will be found by then probably.
No need to worry. Soon they will be telling us that MP3 is just as good as CD and is "perfect sound forever". Then there will be hordes of "audiophile MP3 players" for us all to enjoy. Sort of like 1982 all over again. Come on now, let's get into the 21st century. No sense using any anacronistic little shiny discs, when you can have low-rez downloads, right? And look on the bright side. You won't even have to get up to put on a disc. You can just sit there in your chair and press buttons, and get any music you want. The most convenient format ever.

Then we can see the questions being posted on Audiogon, like "Is CD really better than MP3?" or "What is the most CD-sounding MP3 player?", or my favorite, "If I get a tube preamp, will my MP3 sound more CD-like?". And the answers like, "But I can't get my new music on CD, but downloads are cheap and easy to get.", and "I don't have to clean and care for my downloads like CDs, and downloads don't take up much space".

Thank God I have my vinyl and a good record player.