Sony Computer Entertainment Inc. and NVIDIA Corporation have announced today that the companies have been collaborating on bringing advanced graphics technology and computer entertainment technology to SCEI's highly anticipated next-generation computer entertainment system (PlayStation 3). Both companies are jointly developing a custom graphics processing unit (GPU) incorporating NVIDIA's next-generation GeForce and SCEI's system solutions for next-generation computer entertainment systems featuring the Cell* processor.
full article:
http://playstation.about.com/od/ps3/a/NVIDIAinPS3.htm
Okay... so Sony isn't going with ATI... still... this has me excited as I've played Unreal Tournament on Nvidia video cards before and they are amazing!