Hardware hackers claim to have uncovered the private key used by Sony to authorise code to run on PlayStation 3 systems.
The hackers uncovered the hack in order to run Linux or PS3 consoles, irrespective of the version of firmware the games console was running. By knowing the private key used by Sony the hackers are able to sign code so that a console can boot directly into Linux. Previous approaches to running the open source OS on a games console were firmware specific and involved messing around with USB sticks.
The same code signing technique might also be used to run pirated or counterfeit games on a console. That isn't the intention of the hackers even though it might turn out to be the main practical effect of the hack.
The group, fail0verflow, who also run the Wii's Homebrew Channel, gave more information about the crack and a demo during the annual Chaos Communication Conference hacker congress in Berlin. Sony's weak implementation of cryptography was exploited by fail0verflow to pull off the hack, as explained in a video on enthusiast site PSGroove here.
More discussion on the console jailbreaking hack can be found on a PlayStation forum here. ®