Most times all you need to do is trick the PS3 by renaming the .VOB file to .MPG.
The only other issue that you run into when running them directly from a hard drive, is that the PS3 will only read hard drives formatted using FAT. This limits your file sizes to 4 GB. When you rip your DVDs, you just have to make sure it is compressed to under 4GB. A single VOB file is best also. It gets complicated when you rip it into several vob files, as the defaults usually specify.
Start by removing all the extras, menus and extra sound formats. That will get you most of the way there. If you use too much compression, you will notice a difference in the video quality. If you want to view an extra, you can always dig up the disk again.
You can avoid the size limitation by streaming the movies from your PC with an NTFS drive instead of FAT. However, that is a whole other can of worms. A portable drive, plugged in directly, is a lot easier.
Last edited by Murph; 01/06/09 03:23 PM. Reason: clarity