Actually the DSD technology behind SACD is not new. At the time of CD's public relese back in 1983, the DBX company (yes, the noise reduction people) had a digital recorder/player using almost identical technology as Sony does now. It was called the DBX 700 and it sampled a single bit at 700kHz, and used U-matic Pro broadcast machines as the storage medium. Those who were around in '83 may recall the total blitz that Sony/Philips had in the media regarding CD's "Perfect Sound Forever". DBX acting alone could not compete and were swamped, even though it was a better technology, even at it's early stages of development.
Sony also pushed very hard for recording studios to adopt digital techno;ogy, and I beleive, offerred products at prices where they could not have been making money, so they would adopt. If studios had stayed analogue, it would have made a mockery of all the hype about digital's benefits.
I find it very ironic that now, the same technology that was overrun in the early days of digital, is now touted by the company that pushed it out of the market, as the next step improvement in digital technology.
If I may correct Joe on a small point, SACD samples at 2.822 Mhz, not 2.3 MHz.
The simplest explanation of how it works is thus:
PCM (using Redbook as an example) - takes samples 44100 times a second. Each sample is given a value that is proportional to the waveform at that instant, one of 65536 possible values. These values are stored, manipulated etc and then sent to the DAC to recontructed into analogue so we can understand it. DVD and DVD-A are exactly the same technology, just using more and smaller steps to sample (24 bits vs 16 bits) and higher sampling rates (up to 192kHz vs 44.1kHz). Very, very few ADCs /DACs approach true 24 bit performance, even very expensive Pro units like dCS.
DSD - 2.822 million times per second, thie input waveform is sampled, and compared to the sample before. Is it bigger (+1) or smaller (-1) than the previous sample, and then that 'bit' becomes the next bit of data in the stream. When converted back into analogue, each up or down bit increases or decreases the output voltage from the DAC by a tiny amount. The bitstream for silence would be, +1, -1, +1, -1, +1, -1 etc. In many ways DSD is easier to implement.
This is a very simplified explanation of how they work. A Google search on SACD or DSD (Direct Stream Digital) should turn up a few hits and lots of interesting reading. Some good tech papers can be found at http://www.dcsltd.co.uk/papers.htm
especially the on titled "Effects in High Sample Rate Audio Material".
As for which is the best sounding or will win in the marketplace, I vote for vinyl.
Sorry for running off at the mouth here, but I hope this explains it a bit. If you want further info or a better explanation, I'd be happy to help.