It has finally happened, for real this time.  The PS3 has been hacked.  And not just a little exploit that might one day lead to something people can use, but a full blown game backup and play ability.  Source:http://www.ps3-hacks.com/2010/08/19/usb-plug-play-modchip-for-ps3/
The great thing is this opens the floodgates to homebrew.  We'll be able to see decent software for the PS3 written by enthusiasts.  Of course Sony will act fast to try and prevent this, but speculation is it will work on all existing PS3's and only new hardware versions will be able to plug the whole.
The best part?  No opening your case to solder in a modchip.  It's just a USB plugin.  They're calling it the PS3 Jailbreak.

It turns out this PS3 Jailbreak does in fact build on the exploit by Geohot some months ago (which prompted Sony's removal of OtherOS.  Gee that worked well, didn't it Sony!)
If you want to be able to use the dongle, don't upgrade to 3.42 (or higher) firmware, since the PS3 Jailbreak will cease to function.

Correction: The PS3 Jailbreak does not use Geohot's exploit.  However, now that one group has done it, there are already a number of clones appearing.  They are cheaper (by 50% or more) and use the same exploit.  But be careful if you try to buy one, there are also a lot of scammers out there.
There is the X3Jailbreak, and one coming soon from some people from the PSP hacking scene.  Personally I'm waiting to see that one, since I know they are going to try and put some extra features into the product.  Hopefully something that facilitates homebrew.

The PSP Scene rocks.  After the initial Jailbreak was released, and the clones started appearing, the PSP Scene stepped up and started writing an OPEN SOURCE version!  How cool is that?  You can just grab the source code, buy a Teensy+ board, and make your own Jailbreak.
Even better?  It has been confirmed that a hacked PSP could be used in place of the Teensy board.  Using a hacked PSP to hack your PS3?  Priceless.

Sony has released firmware 3.42 today which closes the exploit.  You can get around it currently using the Logan5 proxy, but that's a temporary measure.  At this point you need to ask yourself the same question as when Sony removed OtherOS: Do you want a PS3 you can install your own stuff on, or a PS3 you can play online?
Me, I want both.  I'm going to use my Sony points to get a second PS3 for online gaming.

Now that's ingenious.  Someone has managed to use a normal SixAxis controller to hack the PS3.  http://www.ps3-hacks.com/2010/09/25/video-ps3-hacked-with-psgroove-for-sixaxis/

Update:  Not so ingenious after all.  He just soldered a PIC chip into this controller.  Nice way to hide it, but still basically the same as having a separate jailbreak device.