What's up with the PlayStation 3? That was the big question on the mind of over 100 journalists when Sony assembled the gaming media in San Diego for its Gamer's Day event in mid-May. Across the industry, publishers, developers, and pundits have been trying to figure out why the PlayStation 3 is off to a slow start. In its first six months of release, the PS3 has sold about 1.3 million units - almost a million less than the PlayStation 2 did during its first half-year of sales. Of course, the PlayStation 3 is a much more expensive machine ($600 versus $299 for PS2) than previous systems, so that must be taken into account. But journalists always love a good horserace. The battle between the PS3 and Xbox 360 is going to be a lot closer than the previous one, when the PS2 won more than 60% market share.

How does Sony plan to keep its lead? It comes down to the games, and that's why Gamer's Day was an important milestone. With few third party exclusives due on the PS3 this year (with the exception of Ninja Gaiden Sigma), Sony is going to be depending on internally-developed games to differentiate the platform.

A Cyclops tries to crush Kratos in God of War: Chains of Olympus for PSP.

LittleBigPlanet may just become the sleeper hit of 2007 on the PS3.

Naughty Dog's next game, Uncharted: Drake's Fortune, is generating a lot of buzz.

The festivities took place inside a huge $6 million dollar motion-capture stage at Sony's San Diego Studio. There, PlayStation CEO Jack Tretton welcomed the press as a group of four Navy SEALs rappelled down from the ceiling to announce SOCOM U.S. Navy SEALs: Confrontation, a 32-player, online-only SOCOM game due out as a downloadable title and as a Blu-Ray disc later this year. From there, Sony went on to profile about 15 first party games for PS3 and PSP that are due out over the next year including upcoming releases like Lair, Ratchet & Clank: Future Tools of Destruction, and Heavenly Sword.

The game I'm most excited about, though, is LittleBigPlanet from Media Molecule. First unveiled at GDC, this inventive title could be one of the big hits at E3 in July. No, it doesn't feature big guns or bald space marines. Instead it carries a cutesy vibe that is more Nintendo than Sony - but it works. As a diminutive burlap-covered character, you run around a world and work with up to four other players (either on the same PS3 or online) to solve side-scrolling puzzles. You collect items, grab onto gears, and even fly in a jetpack to reach goals. And there's a big twist: the worlds are user-created. That means you can build your own levels from right inside the game world, similar to an old PC game from the '90s called The Incredible Machines. Then you share levels on the Internet just like YouTube, but for video games. After going hands-on with the title at Gamer's Day, I am more confident than ever that LittleBigPlanet will make a huge impact. It's coming out as a downloadable game this fall, with the full version due on Blu-ray Disc in early 2008.

Besides LittleBigPlanet, the other standout PS3 game was Uncharted: Drake's Fortune. You may not have heard of the game, but you've definitely heard of the developer: Naughty Dog, the team behind Crash Bandicoot and Jak and Daxter. Uncharted is a more mature direction for the studio, as it stars a guy named Nathan Drake, a descendent of famous explorer Sir Francis Drake. Naughty Dog explained that it can finally abandon abstract cartoon characters because the PS3 has the power to render real humans. The pulp action story, similar in style to Indiana Jones or National Treasure, has Drake searching for a lost treasure on a series of tropical islands. The game's standout feature is its animation system, with fluidity that rivals Prince of Persia: The Sands of Time. Core combat is similar in style to Gears of War, where Nathan ducks for cover and peeks out to fire at unsuspecting modern-day pirates. The game has a ways to go, but look for it in November as the big PS3 title for the holidays.

Finally, this column wouldn't be complete without a quick mention of the PSP. While the Nintendo DS continues to outsell the PSP, Sony has made a strong commitment to developing new PSP games over the next year. By far, the most stunning PSP game on display was God of War: Chains of Olympus, from Ready at Dawn (the developer behind Daxter). I was skeptical that the PSP could handle God of War's fluid combat and massive boss battles. I was proven wrong, however, when I saw a live demo of the game with Kratos battling against a huge Cyclops. It honestly looks every bit as good as the PS2 game! And even better, it' a prequel to God of War, set in the ten years after Kratos kills his family and serves the Gods to seek redemption. Although it's not due out until early 2008, this could finally be the killer app for the PSP.

Overall, Sony had a solid showing of upcoming PS3 games, although the event lacked any blockbuster revelations. There's no question that the PS3 faces an uphill battle later this year against 360 exclusives like Bioshock (August), Halo 3 (September) and Splinter Cell: Conviction (November). But perhaps Sony has a few tricks up its sleeve? Already we know that Killzone 2 for the PS3 will be unveiled in just a few weeks at E3. Something tells me Sony is coming off the ropes; the Japanese giant isn't about to let the Xbox 360 run away with this console race.