I don't know what the story is exactly (I quit my job at a major UK developer shortly before I was supposed to start working on a PS3 project) but there are some details here: http://en.wikipedia.org/wiki/PSGL
Since RSX is rumoured to not be that powerful, I suspect Unigine might be doing the tesselation on the Cell's SPUs.
Since RSX is rumoured to not be that powerful, I suspect Unigine might be doing the tesselation on the Cell's SPUs.