The Xiph.Org announcement page explains, "The next-generation VP9 and HEVC codecs are the latest incremental refinements of a basic codec design that dates back 25 years to h.261. This conservative, linear development strategy evolving a proven design has yielded reliable improvement with relatively low risk, but the law of diminishing returns is setting in. Recent performance increases are coming at exponentially increasing computational cost. Daala tries for a larger leap forward— by first leaping sideways— to a new codec design and numerous novel coding techniques. In addition to the technical freedom of starting fresh, this new design consciously avoids most of the patent thicket surrounding mainstream block-DCT-based codecs. At its very core, for example, Daala is based on lapped transforms, not the traditional DCT."
There's also more details about the Daala video codec on the Xiph.Org Wiki.
Overal, Daala sounds quite interesting but there's still a lot of work ahead until this next-generation video codec is ready. It also has yet to receive the backing of any major corporations, and without that support it's unlikely it will receive any major traction against MPEG.