Sony's main argument to support the decision to use MPEG-2 is that most movie studios are used to work with MPEG-2 format and aren't necessarily capable of using VC-1 or AVC well enough to justify the transition from MPEG-2.
Obviously, this is only Sony's decision and as Blu-ray's specs rule that players need to support all approved video formats, including VC-1 and AVC, it means that other studios are free to use whichever format they prefer. But as Sony is likely to be the first studio to roll out large selection of Blu-ray -movies, it might give a wrong impression of the format's capabilities. Most people obviously wont care what the internal video format used is, as long as it provides better-than-DVD picture quality in HDTV-resolution.
Source: News.com