So what are the implications of this ? Homebrew software ? Pirated games ?
The hypervisor is minimal in terms of overhead. The biggest impact comes from the fact that the PPC core in the PS3 doesn't do out-of-order execution. You'd be downright amazed how huge a difference this makes.
However, nothing under OtherOS used the SPEs really, and it had no access to the GPU, so the speed came down to the in-order PPC core.
My understanding is that for the prevalent workloads presented by most games, out-of-order execution's benefits don't outweigh its costs in chip complexity/size/power consumption/heat/etc.