fail0verflow hacking troupe, a tinkerer known as "KaKaRoToKS" has got the first "custom firmware" (CFW) running on PS3. The modification can be applied to any version of the system's official firmware, including the latest 3.55 patch, and simply adds an "Install Package Files" option in the Game section of the XMB.
Importantly, this unauthorized option isn't an open flood gate for pirated games, but rather a means by which users could install signed and encrypted executable files -- in other words, "retail" .pkg files like the ones Sony uses for PSN downloads. While no current homebrew application is packaged like this (and therefore compatible with the custom firmware), it would be possible for homebrew developers to re-package their files to be installed through the CFW. (PSJailbreak offers similar functionality, DigitalFoundry explains, but as its name implies, Jailbreak allows for the installation of unsigned, unencrypted code.)
"Since the kernel is left unmodified, this means that this custom firmware is really meant for future homebrew installation, and it will not allow piracy," writes KaKaRoToKS in a blog post about the CFW. "I plan on keeping it that way."
First PS3 'custom firmware' working, doesn't allow piracy
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