Actually I remember, the PS3 used to read them as MPEG4.
What happened was, I used AVIAddXSub (makes a DivX file w/o re-encoding, basically adds subtitle support).
Then I plugged my external hard drive in, made sure that the DivX file worked, then I proceeded to delete the original MPEG4 files, and that was when I noticed a lot of them suddenly became unsupported, where before they were read as MPEG4s. I never played them, but at least the title and the little grey box on the right saying "MPEG 4" showed up.
And unsurprisingly, the DivX's associated with the now unsupported AVIs dont work, but the DivX's associated with still working AVIs still work.
So... wtf???