I heard Ibn 'Abbas (radiallaahu `anhu) saying, "Allah's Apostle (sallallaahu `alayhi wasallam) asked an Ansari woman (Ibn 'Abbas (radiallaahu `anhu) named her but 'Ata' forgot her name), 'What prevented you from performing Hajj with us?' She replied, 'We have a camel and the father of so-and-so and his son (i.e. her husband and her son) rode it and left one camel for us to use for irrigation.' He said (to her), 'Perform 'Umra when Ramadan comes, for 'Umra in Ramadan is equal to Hajj (in reward),' or said something similar."
Undoubtedly ‘umrah in Ramadaan does not take the place of the obligatory Hajj, i.e., the one who does ‘Umrah in Ramadaan has not discharged the duty to perform the obligatory Hajj for the sake of Allaah.
What is meant by the hadeeth is that they are alike in terms of reward, not in terms of fulfilling the duty.
Nevertheless, what is meant by equivalency between the reward for ‘umrah in Ramadaan and the reward for Hajj is equivalency in terms of amount, not in terms of type. Undoubtedly Hajj is superior to ‘Umrah in terms of the type of action.
The one who does ‘umrah in Ramadaan will attain a reward equal in amount to that of Hajj, but the action of Hajj brings special virtues and status that are not present in ‘umrah, such as du’aa’ in ‘Arafah, stoning the jamaraat, offering the sacrifice and so on. Although they are equal in terms of the amount – or number – of reward, they are not equal in terms of type or nature.
Ishaaq ibn Raahawayh said:
What this hadeeth, i.e., “ ‘umrah in Ramadaan is equivalent to Hajj”, means is similar to the report narrated from the Prophet (peace and blessings of Allaah be upon him) in which he said: “Whoever recites Qul Huwa Allaahu Ahad has recited one third of the Qur’aan.” Sunan al-Tirmidhi (2/268).
More on it here.
I'm already making niyyah and du`a to do `Umrah this Ramadaan. What about you?