From Bruce Dawson (Microsoft senior software design engineer) on Andre Vrignaud's Blog:
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I see no sign that the PS3 contains a chip that can do vertical scaling, and this new feature (horizontal scaling) is a poor substitute for a true hardware scaler. It is a step forward for owners of 1080i only HDTVs, once PS3 games support it, but it is nowhere near as good as the Xbox 360's scaler.

This recent announcement is just for horizontal scaling, and horizontal scaling is easy. To do high quality horizontal scaling you just need to buffer up a few pixels and intelligently average between them.

Cheap horizontal scaling is even easier: you just send pixels to the video output a bit slower (or send pixels at the same rate, but read them from memory slower). It's the sort of thing that consoles have always been able to do. This new horizontal scaling feature just sounds like they are adjusting the video output rate.

Vertical scaling, on the other hand, is much harder. You need to be able to buffer up (or sample from) two or more lines of data, and then intelligently average between them. For high quality scaling you want to be sampling from a half-dozen lines or more. The Xbox 360 can do this. I don't know whether the PS3 can do this, but if it could I think we would have seen it by now.

This new feature means that games that have previously only supported 720p can now, sort of, be modified to support 1080. When these games detect a display that can't support 720p they can switch to using a 960x1080 buffer. This is only 12.5% more pixels than 1280x720 so the increase in fill rate and memory consumption should be manageable. Then they can tell the PS3 to stretch this buffer to 1920x1080 at display time and voila, 1080 support.

Except, it will be pretty weak 1080 support with an odd and substandard result. The horizontal resolution will be worse than with 720p (960 across instead of 1280), and the images will be twice as blurry horizontally as vertically. 960x1080 is going to look worse than 1280x720 (although it's certainly an improvement over having to drop back to 480i).
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