There's a bunch of technical information available in some Japanese-language articles about PS3 right now, and Engadget has summarized the salient points. It seems that through future software updates, PS3 will be supporting 1080p/24 (that's 24 FPS, the same as film prints), internal YCrCb image processing (right now it apparently does its images in RGB, which then get converted to component video by... I don't know, some arcane inaccurate magic or something), and -- the big one -- DVD upscaling.
Fingers crossed hard.
PS3 To Get Upscaled DVDs [Engadget]
