Fantasmic! is a stage show, but it has some pyrotechnics involved. It takes place in a dedicated amphitheater and cannot be seen outside of it. It has a huge seating area, but dining packages can help you get the seats in the center area. Personally, I usually find a good seat without the dining package, but some people like it. You may still end up toward the back of that section depending on when you arrive.
The Star Wars fireworks now run in addition to Fantamsic! Fantasmic! is quite popular and I doubt it will be going away any time soon. It seems like the timing though is making it difficult to see both. Fantasmic! holds a lot of people and exiting can take a while. If there are 2 Fantasmic! showings on a given night, the second one is always less crowded.