A Hong Kong-based modder known as AnoRelease is claiming to have made a pretty significant change to some PlayStation 3 code, using a highly technical routine to trick a retail console into thinking it was a "debug" unit.
UPDATE - More below, but this new exploit only applies to mod-savvy users already using custom firmware, not everyday retail PS3 units.
Debug PlayStation 3 consoles are those used by developers and some press, and differ wildly from the retail units you buy in a store. A debug PS3 can, for example, install games from files downloaded over the internet (it's how in-progress or preview builds of games are often distributed).
This is why such a workaround would be of benefit to both pirates and homebrew enthusiasts. If the PS3 could be tricked into playing any unsigned/compatible code you threw at it, it'd be a cinch (a relative term considering how difficult this exploit looks) to play pirated games on the console.
AnoRelease's "conversion method" uses a lot of expert-level meddling at the very heart of a PS3 to make the switch. I'll be honest, the kind of stuff being outlined goes way over my head, and carries repeated warnings that one misstep could brick a console. But other users have begun posting clips of the workaround in action, like the one above, in which a copy of Modern Warfare 3 is run using the exploit.
Given the fact we can't verify this ourselves, and that the only "proof" thus far are some blurry YouTube videos, don't treat this as confirmation that, a year after the console's last copy protection saga, the PS3 has for certain been once again cracked open.
We've contacted Sony for comment, and will update if we hear back.
UPDATE - OK, got some more info. Apparently this will presently only work on consoles already using older, custom firmware, dramatically under-cutting its potential for widespread use. Also, the laborious process described in the link below has since been slightly automated.
PS3 CEX (Retail) to DEX (Debug) Conversion Method is Released! [PS3 News, via PS3 HAX]