Sony's firmware update version 3.21 released early April for the PlayStation 3 saw the removal of any option to install an alternative operating system in pre-Slim models. The ability to "Install Other OS" (like Linux builds) was in fact touted as an off-the-cuff feature for early PS3 models:
By installing the Linux operating system, you can use the PS3 system not only as an entry-level personal computer with hundreds of familiar applications for home and office use, but also as a complete development environment for the Cell Broadband Engine (Cell/B.E.).
It appears Sony itself can longer support it out of "security concerns" which you can bet are tied tightly to fears of software piracy. The phasing out of support for alternative OS installations in the PS3 seems to have hit some people harder than Sony imagined. Surely it has faced its share of detractors who saw little reason to remove features from the PS3 as it supposedly refines, but now the company faces a class action lawsuit.
Filed in the North District of California by plaintiff Anthony Ventura, the lawsuit alleges that Sony's attempts to shutter pirates and savvy hackers through disabling the "extremely valuable" OS installation option was "based on its own interest and was made at the expense of its customers." The class in class action here extends to "all persons who purchased a PS3 during the period November 17, 2006 and March 27, 2010 and who did not resell their PS3."
The lawsuit against Sony naturally seeks damages for each potential class member involved, potentially leading to $5 million USD which the company may or may not be forced to evenutally cough up once the actual trial itself resolves. It's still a little too early to say.
Fresh firmware updates do not automatically install themselves onto the PS3, so users may choose to ignore the latest version 3.21 update if they feel the need to continue using the "Install Other OS" feaure. However, these users will not be able to access the PlayStation Network, and play games and Blu-ray movies which do require the latest firmware.