They're probably allowing Linux so they can make a stronger case for the PS3 being a PC instead of a games console.  Wasn't there some issue with them having lower taxes on it or something for importing the systems if that's the case? 

This could actually be the biggest boost for Linux they'll get.  A closed hardware platform, a company with a vested interest in making sure all the peripherals work right, a locked in target audience.  If there's anything that could potentially bring Linux to the masses, this is it.

It would be slick if the XBOX had a full windows interface hidden in there somewhere...  Maybe Windows Mobile, or the Tablet edition?  Something for us developers to play with for free.