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Understanding how it works (YLOD):
The greatest amount of wear 'n' tear on solid state circuitry comes from the heating up and cooling off of the elements (diodes, capacitors, etc). By leaving the device on, you maintain the temp and have less in the way of expansion and rarfaction (the hot/cold cycle) in the circuitry, which is what causes the layers of the diodes, etc. to peel apart or separate from one-another, eventually causing them to wear out.
Specifically How In The Ps3? (contributed by opdutch51)
Ps3's get the YLOD from bad unleaded solder. It gets cracked and brittle which is what leads to the failure of the GPU.
So don't turn off your ps3 every day thinking your doing it for the good. Leave it at the red light and eject the disc out if possible.
Tips and Recommendations
Placing the ps3 in vertical position exposes more surface area and is recommended to place in this position. Eject the disc out whenever you can. Vaccuum the ventilation once every one to two months.
Note: Don't tip your ps3 off when its in vertical position so make sure its in a secure place and out of child's reach.You don't have to keep it upwards, horizontally is good too.