what exactly Does Sony mean by the PS3 10 year life cycle?

[The]

It means the PS3 won't be OFFICIALLY discontinued (stop manufacturing) until at least 2016. That doesn't mean there wouldn't be another product to replace it before that, just look at PS2. The PS2 is going to be 10 years old on March 2010, and I doubt they'll stop producing it next year, it's very likely the PS2 will last longer than 10.