The PlayStation 3, while struggling slightly in the gaming department, is an excellent media player. It supports various video and audio formats, as well as having a built in Blu-ray player. It also supports H.264 playback. H.264 is a very advanced video codec used in Blu-ray/HD DVD, and offers better quality and smaller file sizes than DivX/XviD, at the cost of slightly more processing power (and encoding time). Processing power becomes less of an issue with the powerful PS3, and with H.264, you can encode your own very high quality HD videos. The Xbox 360 also supports H.264 (you can read the Xbox 360 version of this guide here), but the PS3 has one advantage so far and that’s support for 5.1 channel AAC sound tracks (the 360 is limited to 2 channel AAC).
Important: There is also an alternative method running through the guide that first makes a MKV (instead of MP4) file with AC3 (instead of AAC) 5.1 audio, and then using the mkv2vob utility to convert that to a VOB file. This strange VOB file (normally they have MPEG-2 video, not H.264 video) will actually play on the PS3, and the advantage is that it can have AC3 5.1 audio and so you get to enjoy 5.1 audio without any of the limitations to AAC 5.1 (the need for an AAC decoder, for example).
Note that the file produced will have a file size limit of 4 GB, so be wary of this limit and split your files accordingly.
Make sure you are able to playback H.264 clips on your computer first. Consult our H.264 Playback Guide if you are unsure.
This guide uses MeGUI to provide the H.264 conversion from a DVD source or from other file formats (AVI/DivX/XviD/MOV/HDMOV – many other formats, such as MPG, are also supported). MeGUI is one of the newer tools that’s been designed with H.264 encoding in mind. This guide is very similar to the MeGUI H.264 Conversion Guide, except it simplifies a few things and the H.264/MP4 file produced has PS3 compatibility in mind, and with additional mkv2vob instructions. It also covers how to stream playback the MP4/VOB file from your computer to your PS3 (the MP4/VOB file sits on your computer, and when the PS3 is connected to the same network, it will be able to share and play the files located on your computer) using the TVersity software.
This guide is aimed at intermediate users that already have some knowledge in regards to video conversion. As such, basic knowledge of things such as framerate and resolution is recommended (and since you are here to experiment with H.264, this assumption is not all that unrealistic). You will also need to know some network basics for PS3 to TVersity connection, such as knowing what your network IP address is, configuring your firewall or port forwarding if your computer is not on the same LAN as your PS3.
Read Complete Guide : Here
NOTE : All Credits to DVDGuy @ Digital Digest