Sony claimed that all Firmware 2.35 did was "improve stability of some PS3 titles". Well, it turns out that the YouTube compatibility is one of those secret updates that occasionally make it unannounced into a PlayStation 3 firmware update. The functionality was added to the PS3 operating system via Version 2.35 of the firmware.
At the moment, Mainichi Issyo is the only title to do so.
It has just been revealed that videos are captured at 320x240, 30 frames per second and saved in an MPEG-4 file at 768kbps. Sound is recorded at 64kbps in AAC format. The maximum clip length is ten minutes.
Upon selecting to finish their recording sessions, players are given the choice of either saving their clips to the hard disk or uploading them to YouTube. Choose the latter option, and you're prompted for your YouTube user name and password. The game then uploads the clip on the spot, showing a progress bar while you wait for the upload to complete.