IGN has taken the liberty of testing the upscaling feature of the latest 1.80 PS3 firmware. Upscaling is not the only feature however, smoothing is there also, which will do the obvious.
We’ve put a number of PSone and PS2 games to the test. We went about capturing screens from each in a number of different settings so that you can compare them right here from the comfort of your computer. Hopefully it’s cushioned… We captured everything at 1080p through equipment more expensive than many BMWs to simulate what these titles would look like on some of the best TVs available.
From personal tests, I believe smoothing should be enabled on a per game basis, although scaling seemed to work well for all games I tested. IGN doesn’t appear to have a clear conclusion, but you can see their examples and decide for yourself.
Source: PS3 IGN