Instructions
Plug the USB flash drive into the computer.
Click the "Cancel" button when the "Autorun" window comes up.
Right-click the USB flash drive icon on the computer's desktop and click "Format."
Click the "File System" option and click "FAT32" as the flash drive file system. Click "Format" to complete the procedure.
Unplug the flash drive from the computer and insert it into the PS3. Turn the PS3 on, and it now should recognize the flash drive.