I think it actually replaces the 767, or it initially was designed to replace this model, whose sales started dropping when compared to the parallel Airbus.
Basically it's supposed to be made of composite materials, meaning it can be lighter, consume less fuel and make flights better for the passengers. The fact that it's lighter means it can land on shorter strips (for xample) which means its more versatile.
Wikipedia has quiet an extensive entry about the "Dreamliner" (which I think is a horrible name) , and I can't realy compete with them...