A PS3 game disk is divided into three or more 'regions', the number of regions is always odd (i.e. 3,5,7 ... 115 etc). The regions are numbered from 0, even numbered regions (0,2,4 etc) are not encrypted, odd numbered regions (1,3,5 etc) are encrypted. The key that is used to encrypt the odd regions is unique to that version of a game, it is the so called disk key, D1 or data 1.
A typical PS3 game has 3 regions:
Region 0 (unencrypted): Contains the game icon & background image amongst other things
Region 1 (encrypted): Contains the game data
Region 2 (unencrypted): Contains the ps3update.pup
The disk key is stored on the game disk and read by the PS3 when the game starts, without this key it is not possible to decrypt the game data. If the PS3 cannot decrypt the data correctly you will see the 80010017 error just after the game starts.
3K3y can operate in one of two modes, 3Dump & NoKeys.
3Dump mode is able to respond to the PS3's request for the disk key. 3K3y ISOs contain the game's disk key and 3Dump mode uses this information to reply to the PS3's request for the disk key.
NoKeys cannot is unable to respond to the PS3's request for the disk key and instead, relies on the PS3's BD drive to respond. The disk key in the BD drive's response is read from the original game disk in the BD drive.
ISOs ripped with 3K3y Ripper also contain an odd number of regions, the even regions are unencrypted, the odd regions are encrypted with the disk key.
3Dump mode can send the disk key embedded in the ISO to the PS3 directly and, because the disk key the PS3 received from 3K3y is correct, the encrypted region(s) data can be used directly.
NoKeys mode cannot use the disk key embedded in the ISO, instead it depends on the disk key from the original game disk in the BD drive. This will not match the disk in the ISO.
Previously it was necessary for NoKeys users to decrypt an ISO using the disk key embedded in the ISO and then encrypt it again using the disk key from the original game disk. The 3K3y FPGA handles the transfer of data from the 3K3y microprocessor to the PS3, it is now able to to perform encryption on the data as it passes through the FPGA. This means that there is no need to encrypt the ISO with the disk key from the original game, instead the encrypted region(s) of the ISO can be decrypted and whenever the PS3 requests data from an encrypted region, the FPGA is instructed to perform the necessary encryption.