If you like videogames, you should definitely play Dead Space 2. It's really that good, belive me. Some may nitpick about the lack of bosses, the story structure, and the medicre gameplay, but the single-player campaign is both frightening and exhilerating enough to look past such peccadiloes.
Yes it's a continuation of the story. I really enjoyed playing both Dead Space games. I had never played them, and then realizing that #2 was to be released soon, purchased Dead Space 1 and finished that in time for the sequel. It has much more of a blockbuster feel compared with Dead Space 1, which feels too me like crippling tension through and through. I loved both in different ways, but the first scared me more.