Is this area a subduction zone? If so, does that have anything to do with the magnitude of the displacement?
Yes south of Sumatra and Java runs one of the longest subduction zones in the world; I think only South America may have a longer one. It also extends up a bit into the Bay of Bengal. Likely several hundred miles of the subduction face slipped....probably started at the south end where the epicenter is and the slippage moved north.
The epicentral data I have seen places the main shock right in the trench area, southwest of the island of Sumatra. The aftershock sequence seems to be spread out along the trend of the trench. This would seem to be most certainly subduction related.
However, I have also seen conflicting data concerning the depth of the hypocenter. Some listing reports it at the relatively shallow depth of 10 kiliometers, which is unusual for a subduction zone. For instance, the other recent great quake near New Zealand was at a depth of over 60 km - way down in the subducting plate.
On the other hand, I have also seen a report of a hypocentral depth of 40 km - which is more like it - but still on the shallow side. The amount of energy that be released in a subduction-related earthquake (in the area of two colliding crustal plates) is phenominal.