The answer is that sometimes it is, but most often it is not.
Remember that money is a medium, a measure, a standard, and a
store. For some very few individuals bitcoin fulfill all these
properties, and when such individuals transact, then bitcoin is
indeed money.
Those who sell mining hardware often quote their prices in
bitcoin. For these it makes sense because the hardware becomes
more valuable in term of dollars when the bitcoin price goes up,
and vice versa. In terms of bitcoins, however, the value is more
stable. Those who all ready own mining hardware are also used
to a stable income in terms of bitcoins, so for them it is more
convenient to see hardware priced in bitcoins. For these groups
bitcoin is money.
For most other users of bitcoin it only serves some of the
purposes of money. Say that one bitcoin-user owes another
bitcoin-user $100. If they cannot meet in person the debt must
either be settled by a bank transfer or through a bitcoin
transaction. Chance is that they will agree to transfer bitcoins at
the current market rate. It is faster and simpler than doing a bank
transfer. In this case bitcoin serves as a medium of exchange,
and nothing more.
The payment provider BitPay offers this service to merchants.
Though it is a new service, it all ready has thousands of users
and processes more than a million dollars a day. The merchant
can choose to convert all or most bitcoins to the local currency,
making it a low-fee medium of exchange, but not money.
Individuals who used to deal in cash may turn to bitcoin.