Even though the PS3 got the ability to play DivX the Video playback abilities are somewhat limited.
English is not my native language so I tend to watch movies subtitled. Reencoding whole movies takes a lot of time and is hardly something you would call comfortable.
The PS3 Media Server reencodes the Videos on the fly with the ability to add subtitles.
No you can not only view DivX, but also many other formats that the PS3 does not “understand”.
The server is pretty straightforward to setup but feel free to ask me for help.