So the 3K3Y guys have officially release some information on their website:
HOW IT WORKS
3k3y is an optical disk drive emulator for the Playstation 3 video game console.
It is installed between the genuine Bluray drive and the PS3 motherboard.
Once 3k3y is successfully installed and configured it can be used to make backups of your original PS3 game disks to USB media, and play those backups from USB media without the need of the original game disk.
Several games can be backed up to a single USB media, making it ideal as a ‘jukebox’ for hardcore gamers as well as for families with children too young to handle bluray discs with appropriate care.
3k3y works with most PS3 models, however there are a few exceptions, most notably the new super slim model and all PS3s which comes with firmware 4.xx (after retrieving the drive key the PS3 can be upgraded to any firmware). We are working to add support for these PS3′s but you are adviced to consult with your reseller if you are in doubt whether your PS3 is compatible with 3k3y or not.
Play your PS3, PS2 and PSX games from any USB media!
No custom firmware required for operation* – you can update to the latest official firmware for PSN access
Integrated game ripper
User friendly intuitive interface
no soldering required
Compatible with both Fat and Slim models
Supports most file systems, including NTFS, EXT2/3/4, and Mac OS X Extended
High speed USB2 interface
Powerful embedded Linux system running from Micro SD card (included)
Linux firmware fully updatable from USB media
FPGA fully updatable from USB media via built-in, in-system JTAG programming
Recovery mode – it is always possible to recover from a bad flash Update your PS3 as normal, no CFW or game patching required
Pass-through mode. (Use your PS3 in “normal mode”)
* Currently firmware 3.55 is required for exctracting the drive key. Once the key has been extracted the PS3 can be updated to any official or custom firmware. We are working on hardware methods for extracting keys from PS3′s already on 4.x firmware.