It's a business strategy that became popular in the mid-2000s. I, personally, think it's a crock, but a lot of executives and business analysts support the concept.
This is how I've always thought of it...simplified. Think of your business as a ship, and you are a fisherman. You can stay close to port and compete with all the other fisherman, but the waters are bloody (Red Ocean). Or, you can set sail into uncharted waters (Blue Ocean), and find new sources of fish that your competitors are unaware of. If you do this, you will maintain the edge over other fishermen, as your costs of acquisition and yealds are far greater when you don't have to deal with competition.
Also, since fishing in a "Red Ocean" produces fish of the same or lesser quality then the consumer is used to, there is no differentiation between your product and the other fishermen. But, in a "Blue Ocean", you are catching the prime fish. They are larger, they are healthier, and consumers certainly note the difference, and will reward you with sales.
In short, it states that you should think of your existing markets as "Red Oceans", and very little focus should be spent on these areas by strategic leaders in the company. The theory is that "Red Oceans" are contaminated with competition, and if strategic leaders focus on that (say, going tit for tat with Universal for rides), they are not planning a long term strategy that will work and provide rapid growth.
Instead, they theory states that they should focus on creating "Blue Oceans". New markets, new technologies, new experiences, etc. If you can create a "Blue Ocean", then you will realize massive market gains and profits as you are the only place out there where this experience can be had. Marketing and brand become less important than "innovation"...according to the concept.
An example I've heard cited of this being successful are the Nintendo DS and Nintendo Wii. Rather than trying to come up with a unit that competes in the "Red Ocean" with Xbox / Playstation, Nintendo took a gamble and created completely new ways for gamers to interact, and new experiences for them to have. They created a "Blue Ocean", and their sales were fantastic. It was years before their primary competition even took a swim in that "Blue Ocean", so they held a virtual monopoly on THAT style of gaming.
Compare that to Sony. The Vita didn't sell nearly as well as they hoped it would. The theory would contend it was because Sony focused on a "Red Ocean", being traditional portable gaming.
Mind you, this is a very simplistic break down of what it is. And, as I've said, I think it's a load of horsey poo. I prefer the lessons taught in Good to Great, myself.
<shrug>
If you are really interested, go pick up the book. It's not a bad read, I just think it's not something I'd consider a bible for executive strategy...but, many execs do.