Audio bitmapping is related to the form of filtering used when producing the audio source (CD/DVD/other). Typically, in the realm of cd's, the audio source has to be converted to 16 bit and some form of down-sampling has to be used. Different systems use different types of downsampling. Unfortunately, I don't know what the ps3 'types' actually refer to - but I am led to believe that Type 2 refers to 'noise shaping' and Type 1 refers to 'Dithering' - which are both certainly forms of downsampling.

Essentially, when downsampling, there are inevitable compromises made in the process, and the bitmapping methods can help to minimize these issues.

I honestly can't tell you what is best to use - as with all things audio, it's best to have a try and listen and see what you prefer. It is alleged by many that the 'average' listener will struggle to hear a difference. I find that WAV audio playback of ripped CD's is best with no bitmapping at all, but that could easily be personal preference!

As for Type 3, the only information that I can find is that this is 'enhanced bitmapping', which may relate to Sony's SBM (super bit mapping) technologies that they make use of - namely in SACD recordings. Don't hold me to that though.

A little info on SACD and SBM can be found here:http://www.daisy-laser.com/technology/techsacd/techsacd13.htm

Hope that helps.