I don't often get involved in PhysX related threads. However as it absorbed quite a bit of my life whilst doing my PhD I'd just like to get the following in to make sure people are working from facts:
1) NVIDIA PhysX is a software library, it is the evolution of the Ageia PhysX software library, which in turn started out as the NovodeX software library.
2) Its purpose is to perform the sorts of physics calculations required to produce physical effects in any 3D simulation (such as computer games). There are many ways to perform these simulations, those that produce results closer to reality require more processing power. PhysX (amongst many others such as Bullet, Havok, ODE etc.) offer well optimised solutions to perform the necessery calculations to produce the numbers that a games animator can then use to move the elements of their 3D scene to make it look more realistic.
3) PhysX has two sets of code:
a) The standard CPU code. This will run on any CPU.
b) The GPU code, not all of PhysX can be calculated on a GPU, however some of it can, and more is being ported as time goes on. It is up to the developer using the library in their software to make sure that their software correctly detects whether a supported GPU is available, and if so whether it should be used to speed up the calculation of the values. The end values will be identical whether calculated on a GPU or CPU, though with a faster processor to hand (i.e. a GPU) more accurate results can sometimes be calculated.
Clearly as PhysX is a product paid for by NVIDIA (in that they paid to acquire it's intellectual property and now pay to continue to develop it) they are only producing accelerated GPU code using their own Gp-GPU programming language: CUDA, which quite simply won't work on any other architecture.
Should game developers wish to include realistic physics effects that can be accelerated on more than an NVIDIA GPU then they need to look at using something else such as the Bullet library, this is open source and receives quite a bit of funding from Sony. Its developers are concentrating on accelerating its functionality using OpenCL instead of CUDA, this is available on both AMD and NVIDIA GPU architectures.
This isn't intended as opinion on whether PhysX is good or bad, just to offer facts as people seem to get so emotive about graphics cards and graphics companies!