Yup the PS3 is arguably the most ambitious computing project ever undertaken, they are trying to design a completely new way for computers to work. From what I have read the chip does not operate on a small bit size (i.e. 8/32/64 bit) but relies on being able to cope with 4 Megabit size, and the whole chip performs operations on say a whole Movie / MP3 / Graphics object at one time rather than splitting it up. It’s the reason why it has computational power that is almost as fast as the fastest computers built at the moment. Its costing the 3 companies involved lots of money as it was initially a 500 man team with a budget of 1 billion for just research. The aim for the chip in the end is to develop one chip not just for the PS3 but a chip that will work in all consumer electronics… after all what computing task cant be done with the kind of speed this thing will run at.
Also remember the PS3 is an online only console, is intended to be a home entertainment system that allows you to do everything your cable/satellite, Internet and console in one box. Exactly the same sort of idea as Microsoft is working towards but they are just sticking with largely proprietary hardware at the moment. If the PS3 works then it could well become the one item every house will have to own.
I also remember its twice as powerful as the Celeron sitting in your Xbox, which came out over a year later. I'd say most of the hype was pretty justified tbh.
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