Well, looks like PS3 owners are in for another update. Firmware 2.10 is coming tomorrow, at least in the UK. This update adds much awaited DivX support.

Quoted from PSU, features include...

Voice Changer

The Voice Changer feature has been added to voice / video chat. Visit the Voice Changer guide in Help & Support under PS3 at eu.playstation.com for more details.
Using this feature, you can change the tone of a voice that is input from an audio device such as a microphone. High and low-pitched tones can each be adjusted to five preset levels. You can vary the tone when using voice / video chat under Friends.

Music

* You can now select [Type 3] as an option under Settings > [Music Settings] > [Bitmapping]. This bitmapping process was developed specifically for the PS3TM system to enhance audio playback.

Video

* DivX and VC-1 (WMV) have been added to the types of files that can be played. *
* Blu-ray Disc Profile 1.1 is now supported. **
* [BD Data Utility] has been added. ***

*To play VC-1 (WMV) format files, you must go to Settings > [System Settings] and set [Enable WMA Playback].

- Copyright-protected files or files that were encoded by using DivX 3.11 cannot be played. - Files that are 2GB or more cannot be played.

So we have the latest BD profile and the ability to play WMV and DivX. I suspect that the 2gb file limits may have to do with politics of the MPAA (and piracy fears) but this can easily be circumvented by splitting video up into multiple files. It's unknown whether the Mpeg-4 ASP based open source codec Xvid will work. Nothing much else interesting about this update. DivX seems to have the advantage of faster encoding.

Source: PSU

Update: DivX seems to work. I encoded a movie using Dr DivX and it seems to play fine on the PS3. The one advantage DivX has over AVC is that it encodes faster. Xvid however, which is a DivX derivative, does not work on the PS3.