LTC has seen 200% growth over the last week, people are adopting it hoping it will be an equal competitor.

Other people are adopting it just in-case they're right.

This seems a natural consequence of bitcoin's adoption and growth. I see virtually no barriers to entry here, no limit to the number of competing currencies that could be introduced, and as a result no real value to bitcoins. How long can one cryptocurrency expect to be allowed to grow before another comes along and dilutes the market? What factors prevent the average consumer from considering them substitutes? Bitcoins and competing currency are fundamentally similar. They vary only in retail and consumer adoption. I can't make sense of this bitcoin hype.

The barrier to entry is in gaining the adoption.

then spread awareness -- https://bitcointalk.org/index.php?topic=134179.0

Awareness doesn't imply adoption.

What is the incentive for merchants to start accepting litecoin? Why not just bitcoin? Litecoin won't give them lower transaction fees (over bitcoin), it won't give them more customers (anyone who can pay in bitcoin can pay in litecoin).