M78 is a reflection nebula discovered by Pierre Méchain in early 1780.  Charles Messier added it to his catalog on December 17, 1780.  It belongs to the Orion complex, a large cloud of gas and dust centered on the Orion Nebula, and is about 1,600 light years distant.  M78, as all reflection nebulae, shines in the reflected and scattered light of bright stars.  This gives the nebula its characteristic blue color and is essentially the same phenomena that produces the blue color of our sky.

¹http://www.seds.org/messier/m/m078.html