Upsize your PS3 hard drive
It doesn't matter if you have the 20GB, 60GB, or the new 80GB PS3 - you can always use more storage space for downloading games, demos, and HD videos. Sony has designed the PS3 to allow for your own hard drive upgrades. You can go out and select your own hard drive instead of being forced to buy an official harddisk. Good move Sony.
The PS3 is compatible with just about any 2.5-inch SATA notebook harddisk. The physical size of the harddisk is important because it has to fit the PS3's 2.5-inch drive tray. As far as storage capacity goes, it doesn't make sense to go through the trouble of upgrading unless you go big: We're talking 120GB, 160GB, or even 250GB. I recommend 5400 RPM or even 7200 RPM but that will run a little hotter so make sure you have ventilated space for your PS3.
Once you have your upgrade drive, the next step is to backup the data on your current PS3 hard drive to an external storage unit. You can skip this step if you don't want to backup your music, videos, and game saves. The PS3 has a built-in software backup utility that can copy the PS3's hard drive contents to an external storage device, such as a USB thumb drive or a Memory Stick. The removable storage device must use the FAT32 file system. If you have an external hard drive that's formatted in NTFS, you can use the Disk Management utility in Windows to reformat the drive, but you'll need to create partitions on large external hard drives because Windows can do only FAT32 on drives 32GB or smaller.
Save your data using the PS3's backup utility.
If your storage device isn't large enough to handle a full system backup, you can selectively copy data over through the various music, photo, and game menus in the XMB. Your PlayStation Network login and system settings will remain safe on the system during the entire process. After you have your data safely backed up, you can move on to the actual hard drive swap.
You will need a Phillips-head screwdriver to complete this part of the installation process. The PS3 owner's manual also includes step-by-step details on how to replace the hard drive, in case you need more instructions.
Turn off and unplug the system. Remove the plastic HD side panel, and remove the blue screw.
Open the metal latch, move the drive tray to the right, and slide out the drive.
Remove the four screws that hold the hard drive to the tray. Use a screwdriver that fits snugly because the screws are extremely tight and easy to strip.
Swap in the new drive, and replace the screws.
Put the drive tray back into the system and slide it into place. Then replace the blue screw and snap the side panel back onto the system.
Turn on the console and let the system format the new drive. Then load up the PS3 backup utility to restore data from your external storage device back onto the PS3 hard drive.
At this point you have a newly upgraded PS3. Rock on.