Does it live up to the hype? Yes. Avatar takes movies to the next level, to say the least.
Yes, there are big, blue aliens (called the Na'vi) living in a wonderously beautiful alien world (called Pandora)--but this isn't primarily a science fiction movie. Yes, there are eye-popping battle sequences involving futuristic vehicles and equipment--but this isn't primarily an action movie, either. Avatar is driven by the relationship that develops between a paraplegic human soldier, Jake, and the female Na'vi who becomes his teacher, named Neytiri. And it's about the subsequent relationship that precariously develops between Jake and Neytiri's people.
The film is almost three hours long, but it flies by; there is never a dull moment. And if you're doing it right, you're wearing 3D glasses while you watch this film--but the 3D is not a gimmick; instead, it is used to carefully enhance the world of Pandora, and it makes you feel more like you're really there.
James Cameron, the director, has hit several grand slams during his movie-making career, chief among them 1997's Titanic. So his studio allowed him to spend upwards of $300 million on Avatar, making it the most expensive movie ever produced. It will make its money back quickly, and then some. They don't get much better than this.