A PS3 is capable of a variety of outputs. On the back of the PS3 are three output jacks. These are AV Multi, Optical (audio), and HDMI.
AV Multi is the standard 5-cable component output. This is the mid-range standard in most audio/video devices, and offers decent sound and video quality. The output can be slightly enhanced by using high quality cables such as those with 14K gold connectors, but in general, component output is run of the mill.
Optical output is audio only and in the majority of cases, it is used when connecting your PS3 to a stereo receiver or home theater amplifier. If one were so inclined, however, the PS3 does make it possible to use both component video and optical audio output at the same time.
Lastly, and the focus of this article, is HDMI. Short for High-Definition Multimedia Interface, HDMI is the new standard in High-Def audio and video. It combines audio and video output into one compact cable and often comes equipped with gold connectors. HDMI offers a digital alternative to a wide variety of analog interfaces.