A question about PS3 video playback

[NineT9mustang]

You can play DIVX (DVD Quality) from:
USB/Flash Drive
Memory Card
Internal PS3 HDD
Network/Stream via programs like PMS (Playstation Media Server)

You can play MKV (BluRay Quality) from:
Network/Stream via programs like PMS (Playstation Media Server)

You can NOT play MKV from:
USB/Flash Drive
Memory Card
Internal PS3 HDD

If you wanted to play MKV's on your PS3, besides using PMS, your options are:
Downloading a program called MKV2VOB. It converts the MKV's into MPG which are playable on the PS3.
The downsides/upside of this are:

If your playing the converted MKV off a USB drive, the File must be split into 4GB pieces (Due to the USB drive being FAT32, PS3 doesn't recognize NTFS). MKV2VOB does split these files for you

With the PS3 Internal HDD, Your allowed to copy 4GB+ Files to it (Dont argue), so you can copy and play files on the PS3 Internal HDD just fine without splitting the videos...

Your typical MKV file is 4GB for 720p, and 10GB for 1080p... on average that is

Hope this helps!