Unfortunately, the outcome of this is we're all going to lose. Games/consoles will be more expensive. New laws will be written to punish people who modify their consoles for whatever reason.
I've only followed this a little bit, so I might have some of the details mixed up. My question is, did he actually do anything illegal? I thought Sony was trying to claim he violated copyright law, which, from what I've read, doesn't seem to be the case. Figuring out the formula of the key to unlock the PS3 and sharing it is not theft of intellectual property. For example, if I figure out the Coca-Cola recipe and share it, I haven't actually stolen anything or claimed it as my own.
However, when up against these really wealthy corporations, they can sue and sue to the point where the defendant runs out of money and is forced to settle. My guess is that this is how the case will end.
I don't know much regarding video game piracy, but I know a lot about music piracy. The record industry blamed their declining sales on pirates for nearly 30 years (it started with the "Home Taping is Killing Music" campaign in the 80s). The reality is that the structure of the industry itself makes it almost impossible to turn a profit on any artist. I'm not sure if the situation is analogous though.
At any rate, video game technology has progressed to the point where people want to be able to modify their consoles to do things other than play games. While Sony may win this battle, they are fighting a losing war. If my analogy to the music industry has any merit, the RIAA stopped filing piracy lawsuits in 2008.
Footnote: If this doesn't make any sense or isn't clear, I apologize. I've been up since 4AM (after going to sleep at midnight) coughing up Christmas coloured mucus. Too much information. I know.