The PS3 comes with a standard composite AV cable that does not support high definition (HD) video output. HDTVs are getting more common these days, and if you want to make the most out of it with your PS3, you'll need to purchase a better cable. The common connectivity options for your PS3 are explained below.
This is the default cable that comes with your PS3. Outputs at standard defnition (SD). If you play on a SDTV that only has composite input, you'll have to make do with this.
S-Video produces better quality video signals than the composite cable, but is still limited to SD output. If you have a S-Video compatible SDTV that does not support component input (see below), this is the best you can get. You find a cheap one at Play-Asia here.
Component supports both SD and HD outputs, up to 1080p (Full HD). At SD output, component produces better quality video signals than S-Video. At HD outputs though, HDMI (see below) is preferred. Still, some older HDTVs may not support HDMI, and you may have to make do with component for your HD output in that case. A cheap one is available from Play-Asia here.
HDMI is the standard for HD output now, and almost all current HDTVs support it. This is the preferred video output choice for HD gaming. HDMI also transmits digital audio signals that can be passed through a receiver for 7.1 sound (Dobby Digital/DTS). There is no need to buy premium HDMI cables and a normal one will do just as good a job. Play-Asia has a cheap and good HDMI cable here.
5. Optical Cable
This is not a video cable but a sound cable. It transmits digital audio signals that can be passed through a receiver for 5.1 sound (Dobby Digital/DTS), similar to HDMI. Note that the lower bandwidth of optical compared to HDMI limits the output to 5.1 (Dobby Digital/DTS) or 2.0 PCM. This should not be a problem for users though. Using either a HDMI or optical cable hooked up to a receiver will give you a much better sound quality compared to RCA (red and white) audio cables. You can get a cheap optical cable here.
In summary (in decending order of quality):
For video: HDMI > Component > S-Video > Composite
For sound: HDMI or Optical > RCA
I hope you find this short article useful. Do show your support by clicking on my affiliate links above if you need to purchase a cable.