MKV to PS3 will re-encode anything not compatible with the PS3.
MKV is a container file that holds video, video, and subtitles if they exist. If you see MKVtoPS3 remuxing, thats good because it will be quick as the PS3 is extracting the audio and video and putting it into a new container file that can be played on the PS3.
If you see encoding, that means it may take a long time depending on how long the video is. The program will have to re-encode whatever is not compatible.