HDMI
High Definition Multimedia Interface (HDMI) is an audio/video standard that can transmit both digital audio and high-definition (HD) video. HDMI supports video up to 1,080 pixels---the highest resolution possible on most HDTVs. Since many PS3 games are designed with HD in mind, you will usually get the best possible picture when using HDMI.
RCA Cables
RCA, or composite, cables are not compatible with HD signals and can only transmit standard definition. In the past, some gamers have complained that playing new HD-compatible games in an SD resolution makes text and other small details nearly impossible to see.
Function
If you do decide to switch back to RCA cables instead of HDMI, you don't have to worry about any averse effects to the system. The PlayStation 3 is designed for compatibility with both RCA cables and HDMI cables. Thus, either will work with the system, and you can interchange them at any time.