Hackers have finally completely torn apart the PS3's few remaining lines of defense against running unauthorised code.
George 'Geohot' Hotz, famed for cracking the iPhone platform and making way for the infamous Jailbreak, has decrypted the so-called "root key" of the PS3 and posted it onto the internet for everyone to work with.
A PS3 Jailbreak was indeed released late last year and allowed for the running of pirate games, but for reasons too technical for us to completely understand, it was restricted in its access to the console's inner working limiting its uses.
This new development basically means that the homebrew and piracy scene will now essentially be able to create anything they like, from homebrew apps and games, to PSP-style custom firmware and, unfortunately, pirate games, without restriction.
Similarly, another hacking team by the alias of 'fail0verflow' has decrypted and reconstructed the tools needed to sign code in the exact same only Sony should be able to, and released these tools on the internet. This means that any unofficial executable file created for PS3 can be made to appear as a Sony-authorised program even to entirely unmodified PS3s.
What's more, these signature keys operate at the core of PS3, meaning this cannot be fixed simply by releasing a new firmware. Sony, to put it bluntly, has lost this fight.
'Geohot' described the fundamental flaws with PS3s security in a presentation at a recent event. Check it out through the link but get your professor hat on. It gets technical.