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PS3 is getting in-XMB Youtube functionality as of… now. The free download will appear in the ‘My Channals’ bit of the video services section and offer a fully integrated and optimised service.

PS3 Youtube app now live
The app has apparently been, “designed for the big screen and PS3 controls”. Here are the main points from the press release, followed by a breakdown of all the key features.

Search: Finding videos is easier than ever, with search suggestions and instant video results while you type.
Access to subscriptions: Sign in to find the latest videos from your YouTube subscriptions, which now also includes official music videos.
Your smartphone as a remote: With a quick pairing process, you can control YouTube on PS3 with a smartphone. Find a video on your phone and with the click of a button it’ll play on the big screen. While the video is playing you can control it from the phone, or keep browsing YouTube for the next one.
Key Features

User Experience:
User Interface Optimized for TV
Video Search
Ability to Browse and Search for videos while watching
PS3 Game Controller Support
HD (Up to 720p)
Content Flagging
Closed Caption
YouTube trending and popular video playlists
Smartphone and Tablet Pairing
Browse and search for videos on phone/tablet while watching on PS3
Fling videos to PS3 from smartphone or tablet
Control video with smartphone
Comment on phone while watching
Signed In Experience
Sign-In and Channel Guide
User’s liked videos
Watch later videos
User’s playlists
Subscribed channels
Search History
Please note that “Uploading the video” won’t be available for the YouTube application on PlayStation®3