For future reference, the online
PS3 User's Guide, like the paper version that comes with the PS3, offers at least a little bit of explanation. (What isn't explained is why the Audio Output Format is found in the Video Settings section.)
If your PS3 decodes and outputs as PCM then your receiver will indicate as much. If you set output to bitsream the receiver will indicate what the particular codec is (i.e. Dolby TrueHD). If the audio track is PCM then there's nothing to decode so your receiver will say PCM (or Multi-channel) regardless of your PS3 settings. It's important to note that you're hearing the same thing whether the PS3 audio output is set to PCM or bitstream.