Litecoin is actually different. The main reason you're hearing about it is because it uses a different mining algorithm from Bitcoin. This different algorithm makes it so GPUs are the most efficient hardware that will exist for mining for the forseeable future.

Scrypt is not FPGA or ASIC-friendly.

Since ASICs are now working on Bitcoin, GPUs are shifting to where they will be profitable for some time. This is why people are building rigs for Litecoin and Litecoin's price has spiked up. See, it all starts with the miners and we're set to have more individual miners in Litecoin than Bitcoin ever counted.

On competition, I don't actually see Litecoin as a competitor to Bitcoin. It can be a way to hedge. It can be a training ground for Bitcoin miners. Or maybe it'll be the first altcoin to show that altcoins can and will succeed if they offer value to a significant number of people.