Guys just an update really. I took my machine back to the videogame store i bought it from ( Gamestation). They just gave me a replacement machine on the spot. They told me mine was the first PS3 they ahve recieved back since launch, and was going to send it to Sony to look at.
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Is the game that you are trying to play on a burnt or home made disk? If so, that may be your problem. If it is a regular store bought disk and it can't recognize the game then its a different situation and I would suggest purchasing a disk cleaner instead. There is probably dirt on sensor that needs to be cleaned.
If you have warranty with your PS3 you can send it to Sony so they can fix it. If you don't have warranty anymore then they will charge you $150 (that's a 150 dollars or some people said it was more pending on the different problems) for the repair of your PS3. Either way it can take up to 6 weeks before they send your PS3 back. Also note they wipe your hard drive contents! Speaking of which you might try just this: reformatting your PS3 hard drive! But if that doesn't work and you're not ready to pay that amount I suggest you use a guide that let's you repair your PS3 by yourself without the need of opening it. Such a guide fixes stuff like Yellow/Red/Green Light of Death (is your PS3 having one of those lights?) as they call it and other common problems with PS3 consoles (error codes, black screen, disk errors, error codes). Click here to read about this do it yourself guide.
I suggest you sending back since it is still underwarranty...the hard drive sounds like it has gone out as it has on mine in the past. My warranty was up so they wanted to extort $150 and I refused. I fixed it myself for 100 and turned it from a 20 gig to a 320 gig...yaaaaa budddy!
if your ps3 doesnt play ANY games or dvds, that may mean that the eye on the ps3(the thing that reads the disks and dvds) is malfunctioning, not moving efficiently enough to procces the disk, not recognizing the encrypted code on the disks, or the optical eye could even be scratched. the disk feed could also not be feeding the disk in far enough for the eye to read it. i would definitly suggest calling customer service and/or bringing the ps3 to an A+ certified technition to "diagnose" your problem.