UPnP/DLNA isnt a video format, its a control format. What DLNA does is "announce" a given hard drive to a UPnP/DLNA compatible "rendered" (in this case the PS3). Its up to the renderer (ps3) to support whatever formats the content on the drive is in. As long as the PS3 is compadible with the formats your files are in your hard drive will show up in on the XMB and you can browse the files.
Things you may want to keep in mind is the size of the files and the method of transport. For example you wont be streaming DVD/BluRay quality movies over WiFi but you can running wired at Gigabit.
Anyhow, thats just a bit more info on UPnP/DLNA.