(The following text is an edited extract from http://en.wikipedia.org/wiki/Dvd)
In 1993, two high-density optical storage standards were being developed; one was the MultiMedia Compact Disc, backed by Philips and Sony, and the other was the Super Density disc, supported by Toshiba, Time Warner, Matsushita Electric, Hitachi, Mitsubishi Electric, Pioneer, Thomson, and JVC. IBM's president, Lou Gerstner, acting as a matchmaker, led an effort to unite the two camps behind a single standard, anticipating a repeat of the costly videotape format war between VHS and Betamax in the 1980s.
Philips and Sony abandoned their MultiMedia Compact Disc and fully agreed upon Toshiba's SuperDensity Disc with only one modification, namely changing to EFMPlus modulation. EFMPlus was chosen as it has a great resilience against disc damage such as scratches and fingerprints. EFMPlus, created by Kees Immink, who also designed EFM, is 6% less efficient than the modulation technique originally used by Toshiba, which resulted in a capacity of 4.7 GB as opposed to the original 5 GB. The result was the DVD specification, finalized for the DVD movie player and DVD-ROM computer applications in December 1995. In May 1997, the DVD Consortium was replaced by the DVD Forum, which is open to all other companies.
"DVD" was originally used as an acronym for the unofficial term "digital videodisk". It was reported in 1995, at the time of the specification finalization, that the letters officially stood for "digital versatile disc" (due to non-video applications), however, the text of the press release announcing the specification finalization only refers to the technology as "DVD", making no mention of what (if anything) the letters stood for. A newsgroup FAQ written by Jim Taylor (a prominent figure in the industry) claims that four years later, in 1999, the DVD Forum stated that the format name was simply the three letters "DVD" and did not stand for anything.
The official DVD specification documents have never defined DVD. Usage in the present day varies, with "DVD", "Digital Video Disc", and "Digital Versatile Disc" being the most common.
The DVD Forum website has a section called "DVD Primer" in which the answer to the question, "What does DVD mean?" reads, "The keyword is 'versatile.' Digital Versatile discs provide superb video, audio and data storage and access -- all on one disc."