My guess at the moment and for the short tem future, it would be something like the little flash memory cards that are used for digital camera photographs.
The audio quality could be better than CD- they can hold far more data than a CD, though for people brought up on MP3s, audio quality seems to be something that does not matter, so the manufacturers will probably go for video content instead.
As for security for the artist, they will probably have some kind of copy protection- which will be hacked within weeks, so that will be just the same as it is now.
People with CD collections will moan that you don't get the benefit of the case notes and artwork on a one inch square of plastic.
People with LP collections will need to find their glasses before they can see them at all.
Cheers
Dave