I don't really understand Ripple and XRP, but I remember reading that it is meant to compliment bitcoin and not directly compete with it. Is this true? Or will people be able to use XRP to buy goods just like BTC?
For now the goal of XRP is (and will always be) to accommodate trades within the Ripple network. Although Ripple Labs has stated over and over again that people should not invest into XRP (given the risks involved) they have however stated that they hope it will reach its own intrinsic value in the future. In that case it might as well be used to buy good, unlike BTC which has almost never been used to buy goods out there. At least when you compare the number of hodlers/traders to the people that actually use it, which remain to be an exotic, very exotic minority.
In the longrun, the case for bitcoin is as an asset that can be money, but which no one can censor/control. It needs some moderate level of merchant adoption to provide the practical economic link, but it doesn't need to replace fiat as far as everyday purchases go. XRP will never be that uncensorable value-store, since it's not decentralized in the way bitcoin is (see recent stellar/ripple core consensus alg failure).
It's actually because of that non-pure decentralization which will make banks more willing to integrate with Ripple. My intuition right now is that Ripple and Stellar will lean more and more centralized over time (for both political reasons, as well as the unfortunate fact that their consensus algorithm is broken at the core wrt meaningful decentralization), and if they become successful, they will effectively be controlled by a small number of banks who run the major gateways and validating nodes.
Which is fine; XRP and BTC don't compete in the same primary domains, even though some people right now seem to think they do. XRP competes in the domain where you want to hold XRP for just long enough to get a transaction done. If it catches on, it should be a high-velocity (which is inversely proportional to market-cap) pseudo-currency. BTC, though, ultimately competes in the gold market and stored-liquid-wealth domains, which are magnitudes larger than instantaneous high-velocity transactional demand. If you do the math for transactional demand, you get market-caps in the low tens of billions at best; the mcap for currency-as-store-of-wealth work out to hundreds of billions to low trillions (some would argue double-digit trillions).
tldr: Ripple and bitcoin do not ultimately compete because Ripple is not sufficiently decentralized. Total target/potential market-cap for BTC is orders of magnitude higher than for XRP.