Are h.323 and SIP two protocals for encapsualting voice over an IP
network ?will SIP replace h.323 ?  which is better for business users
looking to implement a voip system ?

This might be a good site to look at:
http://www.voip-info.org/wiki-Open+Source+VoIP+Software

Specifically, you might want to take a look at Asterisk. It supports
just about everything. http://www.voip-info.org/wiki-Asterisk

I am not a GA Researcher. I am not affiliated with the URLs provided.
This is a free comment.

Are h.323 and SIP two protocals for encapsualting voice over an IP
network ?

encapsulating??
These two protocols are mainly used. MGCP is another protocol and some
service providers are using it.


will SIP replace h.323 ?  

Probably. 
H.323. We cannot say replace, however, nowadays SIP users and vendors
are getting more and more while less.


which is better for business users looking to implement a voip system ?

It depends on your situation. If you are using PBX in your system, you
should contact your PBX manufacturer for VoIP.
Currently there are many ITSPs (Internet Telephony Service Provider).
Some suport H.323, others support both H.323 and SIP, and the others
support SIP.
You can choose the ISTP later.