Yep... it just upscales them to the correct ratio.
There may be some reasoning to the other mode if, say, you had a 4:3 TV and you found the quality to be better by using Full Screen mode from the PS3, but changing the aspect ratio on the TV to Letterbox 16:9...
The other reason I've found is if you're watching 4:3 material, normal mode will upscale to the height of the theoretical letterbox on a 4:3 TV (in other words, the image will have black borders round all edges). Full Screen mode will upscale 4:3 material to the full size of the screen.
Hope that lot hasn't confused you... still, getting an answer in 5 minutes isn't too bad, eh?
whilst someone is answering the above question could someone advise me the settings i should be using to upscale to a 45 widescreen tv. should it be normal 16*9
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