What formats does the PS3 support?

I can’t seem to find an answer to this.

I have seen sonys documentation of this and it claims to support h264 mp4 video. But most my files are h264 mkv videos. I would expect them to direct stream. However I can’t get any file to either direct play or direct stream. Just transcode (which works fine). Why is this? And can someone tell me more in depth what video formats the PS3 really supports?

See this support article
https://support.plex.tv/hc/en-us/articles/204377253-What-media-formats-are-supported-

What about MKV videos?
The Plex for PlayStation app does not currently support Direct Playing of MKV container videos. If the audio and video streams in the file are otherwise compatible, it will be Direct Streamed.

Yes thanks but that is why I said that I expect it to direct stream (not direct play). But it doesn’t do that either. Is it because my files are 1080p? I see in that article that 720p is max. Will the server transcode the files to 720p because of this?

Yes, if your content is 1080p then it will get transcoded to 720p as that is the limit of the PS3 plex app