The games are in bluray format. The ps3 has 3 different lasers (built into one) in the drive. When the bluray laser fails but not the others it will continue to play everything except bluray. You can fix this by getting a replacement laser (ebay etc) opening up the console and drive and swapping out the laser. This is fairly easy as its mainly screws, but there are a few cables to be delicate with. Here is a disassembly guide.
http://llamma.com/PS3/repair/PS3_disassembly_tutorial.htm
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