What is the Blue Ocean Strategy in business and how does it differ from other strategies used by companies? What does it mean to create "uncontested market space by creating blue oceans?"

Hi Liana,
The Blue Ocean is a new term that Chan Kim and Renee Mauborgne came up with to describe an ever-existing phenomenon that is of creating “uncontested market space” out of existing ones. See, today’s industry is so crowded that you have a bloody red ocean of competitors competing over a tapering profit pool, which makes it unlikely to create profitable growth in the future. Red oceans define all today’s existing and invaded industries whereas blue oceans represent all the industries that do not exist yet. Confusing? Not really! The key is the innovation value. Therefore, instead of exploiting existing demand, you unleash and capture a new demand and create the innovation value rather than the added value. Hence, you create uncontested market space by creating blue oceans, commonly known as new opportunities. That is not new; this concept has always existed, if you look back to industries of the 20th century and today’s industries, you will realize that many have emerged since then, such as the automotive and IT industries.
Back to how it differs from other strategies commonly used by companies. It’s simple, the Blue Ocean Strategy tends to replace the competitive advantage that most companies seek, with value innovation as its main goal.
I suggest you read this report; it will help you understand each strategy and its benefits. http://ondernemerschap.panteia.nl/pdf-ez/h200801.pdf

I agree with what Abgour said and would just add that I think a lot of people refer to this also as "disruption." If you are truly disruptive to an industry, you create a space for yourself where no one can touch/compete with you. When you're thinking about a strategy, as a company, you want to be able to choose the best place in the industry to compete. A good example is Amazon - they created a new space within the retail industry that no one else had really done, by being different in ways that are important to customers.