Well, one reason that was so successful with the PS2 is that DVDs were a really booming industry. People had pretty much recognized that the VHS's time had come and gone, and were waiting for a format that provided much higher visual/audio quality, better controls, things like that. DVDs were popular and were quickly embraced, and they gave consumers everywhere the sense of security that the format would be around for a long time to come. It was also a pretty broad-based format in terms of how you could use them everywhere.
The UMD, despite the first word in its accronym, is not nearly as universal as the DVD was. It's a much more limited media format, and with its introduction, it just wasn't something people craved as highly as they did DVD players. Not as broad based, not thought to be as long lasting, limited to only one single device. People were ready to throw away their VHS for DVDs, but not many people want to ditch their DVD collections to buy the same stuff on UMD, at the same price, but with less content.
That's not to say that UMDs/the PSP have been unsuccessful... but if anyone expected the mass media culture to embrace it as fully as it did the PS2's DVD capabilities, that was just nuts. UMDs could never have offered the same cultural significance that DVDs did.