They are on Blu-ray discs, so yes the manufacturing process differs from PS1/PS2 CDs/DVDs... tons of info here on them though: http://en.wikipedia.org/wiki/Blu-ray_Disc
PS3 Blu-ray game discs also have multiple layers of encryption and checks which all must pass through the PS3's hypervisor, which is probably one reason why we haven't seen a PS3 Action Replay/GameShark yet.
Some detailed info on the PS2 direct-boot process can be found HERE, however, it isn't the same as on PS3 due to the above reasons among others I'm sure.
only on some of the models. my friend has a 60gb backwards compatible one, but i have the 40gb one.
Oh ok. You didnt mention what PS3 you had or if you were still deciding on which one to buy. Well, there was a post a few days or so ago where where someone said it might be possible for the 40Gbs to do the PS2 emulation in software via firmwareupdate at some stage