I'm not one to promote or decry copying. I happen to think PSP homebrew is one of the brighter spots on the PSP. I also think that console companies would do well to embrace, rather than battle hackers. But what I believe is irrelevant, what you really want to know about is how the PS3 got hacked.
PS3news.com broke the story, covering the exploits and details of how it was done. For specifics, I recommend visiting PS3news. But in a nutshell, via the installation of a version of Linux, some backup software, and copy of Madden '07 three games have been successfully backed up, or "dumped", Madden, Resistance, and Genji.
Thre process isn't simple, but it seems easier than many of the PS3 hacks that are out there. Of course, if the PSP has taught us anything, it's that Sony doesn't take kindly to hackers. I'd bet even money on a new PS3 update that patches the problem being a requirement to play any new game in '07.