Assuming you have the older 'fat' PS3, for Blu-Rays PCM is best to allow the PS3 to decode the HD audio formats onboard. For DVDs, it's up to you, bitstreaming will send the Dolby Digital / DTS soundtracks for the amp to decode, PCM will decode them onboard.
If you have the new 'slim' PS3, again it's up to you but most people believe bitstreaming to the amp is best for everything.