Instructions
Log on to your PS3 account and navigate to the "Settings" menu on the XMB dashboard.
Scroll through the "Settings" menu and select "System Settings." Select "Restore PS3 System" from this menu.
Read the warning screen and confirm that you want to delete all of the information on the PS3 HDD by highlighting and selecting "Yes." When prompted, choose the "Full Format" option.
Wait for the PS3 to complete the reformat process and reboot. Follow the onscreen prompts after the welcome screen to complete the process.