google always makes me mad it takes me to jailbreak sites that say this stuff that I think ended up being outdated and now I don't know what's outdated and then it said to buy weird USB models of weird huge chipboards called USB39093903903 or something and blah
1. You need a jailbreak dongle (check out gbatemp's review of PS3Break and x3max). I have this cheap-ass clone (psjailbreak2) and it works very well. You can find it on dealextreme for $9. (link). There are other cheap alternatives like AmazeBreak and MatrixPS3 (both for $6).
2. You need a backup manager. I reccomend MultiMAN.
You can use an external HDD (must be FAT32) and/or the PS3's internal HDD to play games. BUT some games only work from internal HDD, for example Red Dead Redemption, Heavy Rain, Vanquish, etc... (for a complete list check out PSJCL).
I think that's pretty much it.
EDIT: Oh and you have to use OpenSplit to split >4GB files. I recommend OpenSplit because it's compatible with MultiMAN unlike Comgenie's Awesome File Splitter where you have to rename every file.
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